Commercial Investment Real Estate September/October 2018 | Page 30

Top Absorption Markets
Market
QTD
Completions (sf) QTD Total Net
Absorption (sf)
Atlanta 3.7 million 5.2 million
Chicago 3.9 million 3.9 million
Dallas/Fort Worth 2.9 million 3.8 million
New Jersey 7.0 million 3.6 million
Source: JLL Research, 1Q2018
spec buildings very close to completion,” Vanchiere says.
“Once we have got slab on the ground and steel in the air,
companies take notice and they can see time to market in
terms of how quickly they can be in a facility,” he says.
Space users think they can go to a market and be able
to find space. What they’re finding is that they will go to
a market, but the space that they need — whether it is the
amount of space, type of space, or the way they need it con-
figured — is not readily available, Conway says. “I think a
lot of users could do themselves a favor and give themselves
a little more time to find the space that they need,” he adds.
Given the demand and low vacancies in many metros,
that scenario isn’t likely to change any time soon. Earlier
planning will continue to be key for end users, especially
those that are looking to locate in new facilities.
Beth Mattson-Teig is a business writer based in
Minneapolis.
Investors Compete for Industrial Assets
by Beth Mattson-Teig
Industrial remains the flavor of the month for investors. The biggest complaint for many is not the continued
cap rate compression, but rather the limited supply of quality assets available to buy.
Sales remain robust even as for-sale properties become harder to find. Rising prices helped to spur year-to-
date sales volume through May to $30.5 billion. That volume is just shy of the high watermark of $33.6 billion
set in 2015, but is well ahead of the pace set in 2016 and 2017 at 26 percent and 15 percent, respectively.
“Industrial property acquisitions are on top of my short list of property types that interest me and my group,”
says Kamil Homsi, CCIM, president of Global Realty Capital in New York City. However, scarcity of industrial
assets for sale in high-demand markets, such as the Northeast, compressed cap rates, and available capital
are driving investors to new markets that were not on their radar screen a few years ago, he adds.
Global Realty Capital is most interested in assets located in secondary markets due to the more-attractive
cap rates and yield spread relative to primary markets, as well as the growing demand in secondary markets
that is being fueled by e-commerce. “We are yield-driven, and are finding plenty of opportunities in midsize
warehouses ranging in size from 100,000 to 350,000 sf built in the last 15 years that meet the tenant
requirements of proximity to highways and thoroughfares, ceiling height, sprinklers, loading docks, etc.,”
Homsi says.
Despite rising interest rates, avid buyer demand continues to put pressure on property sale prices. May
sales data shows that prices rose 10.8 percent year-over-year, with cap rates dropping 40 basis points to
average 6.4 percent, according to Real Capital Analytics.
Yet investors are finding a competitive marketplace even in those secondary and tertiary markets. In
Indianapolis, for example, cap rates have continued to compress, with record-setting lows around 5.5
percent, notes Angie Wethington, CCIM, JD, a director at Scannell Properties in Indianapolis. For example,
Granite REIT bought a 600,000-sf bulk warehouse facility in southwest suburban Indianapolis for a reported
$66 psf and an estimated cap rate in the low 5 percent range, she adds.
Investors are looking to buy assets in secondary and tertiary markets like Des Moines or Minneapolis,
where they can get investment-grade assets with good credit and terms, but the prices are not as high as
a bigger market like Chicago, agrees Jason Conway, CCIM, director of real estate development at Opus
Development Co. in Minnetonka, Minn. Opus is a merchant builder that is actively building in markets such
as Phoenix, Denver, Chicago, Minneapolis, Cincinnati, Indianapolis, Milwaukee, and Kansas City. “We see
investors with quite an appetite to continue to acquire well-located industrial assets that have good credit
tenants and good terms,” he says.
Beth Mattson-Teig is a business writer based in Minneapolis.
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September | October 2018
COMMERCIAL INVESTMENT REAL ESTATE