BOSTON
In the second quarter, the greater Boston industrial market rebounded from a lackluster first quarter with a modest gain in tenancy. The market was buoyed by activity in the warehouse sector and the research-and-development/flex sectors, but lacked the clear indicators of a growth spurt.
Gains in the quarter totaled more than 400,000 square feet of net absorption, despite several manufacturing and distribution companies plans to leave the state. Asking rents remained flat overall at $7.67 per square foot, but increased in the central warehouse/distribution sector and also in the North general industrial sector.
As the industrial market remains mired in a low-growth holding pattern, a superficial assessment might show little change. A deeper view reveals that the market does appear to be transforming as jobs in the traditional manufacturing center give way to growth in high-tech manufacturing.
PITTSBURGH
Absorption for the second quarter was a robust 600,000 square feet with increased activity across the board. Several pending lease transactions are expected to result in additional absorption by year’s end. Overall occupancy ended the quarter at 92%.
Industrial investment sales experienced a boost in activity. The 900,000-square-foot Allegheny Distribution Center sold for $19.7 million. And the 400,000-square-foot 79 North Industrial Park is expected to sell by the year’s end. Both properties attracted capital from institutional and private equity sources outside the region.
The Northwest submarket remained the most active with a number of leases.
In the West submarket, the construction activity around the Parkway West and I-79 intersection related to the installation of the Missing Ramps bodes well for the speculative buildings under construction at McClaren Woods Business Park, Clinton Commerce Center and Imperial Business Park, as well as the 1,000 acre WestPort project at Route 576.
CHICAGO
New development activity is under way in Chicago with more than 14 million square feet under construction. And the market shows no signs of halting industrial production. Developers are building bigger to accommodate user demand.
Investment sales for the quarter are healthy, especially with sale-leaseback activity. Warehouse/industrial capitalization rates are at historic lows, but they are expected to increase slightly from 5.75% to 6.25%.
On a per-square-foot basis, sale prices are climbing due to rapid increases in land and construction costs. Overall vacancy stands at 8.3%, a decline of 10 basis points from 8.4% in the first quarter. Tenant demand remains prevalent and users are continuing to flock toward sites close to rail, interstates and air transportation routes.
Absorption for the second quarter was 1.3 million square feet.
However, absorption just one year ago was more than double at nearly 3.2 million square feet.
Analysis by Grubb & Ellis Co.
