Orange County
The year 2000 witnessed explosive activity in the Orange County industrial and R & D; markets. Tenant demand rose well above forecasts for the year, causing a critical shortage of available product across the county, especially in certain size ranges. As a result, asking lease rates and sale prices escalated, and space was absorbed quickly upon entering the market.
The local economy continued to bear the fruits of the longest expansion in the history of the United States. Orange County unemployment, in the high 2% range all year, was the lowest in Southern California. Substantial increases in international trade, particularly with the reawakening “Asian Tigers,” also benefited the increasingly tech-oriented landscape of the county. A surge of demand hit the Orange County market from the very beginning of the year and intensified as desirable space disappeared and new construction slowed. By mid-year, industrial vacancy had reached an all-time low in the county. Sale and lease activity was especially brisk among buildings 10,000 square feet to 25,000 square feet, on which private users and investors have focused their attention. Big-box industrial and R & D; space is also rare and expensive in Orange County, forcing eager tenants to expand their searches into the Inland Empire.
Local demand and lease rate hikes were strengthened by the emergence of telecommunications data centers and an increase in switching stations near fiber-optic lines in Orange County. As industrial buildings near fiber lines have been acquired for telecom use at enhanced lease rates, the supply for general industrial users has become further constricted. Developers were eager to capitalize upon the pent-up demand, but land for development was extremely hard to find throughout the county. As a result, demand far outpaced the completion of new construction during 2000, even though combined completions totaled nearly 5 million square feet.
The lack of supply that grips the Orange County industrial and R & D; markets will certainly continue through the coming year. The increases in interest rates and real estate stock market volatility will do little to reduce the level of demand in the diverse local economy. After a relatively slow beginning, industrial market momentum will steadily build throughout the year. Demand will again outpace the addition of newly constructed space, making the quest for quality product more difficult. Although many local businesses will be looking for opportunities to buy product, few buildings will be available for sale, especially in the smaller size ranges. Lease rates and sale prices will escalate once again, especially near fiber lines where telecom activity will be centered. As a result, companies may be forced to look outside of Orange County for affordable, quality space.
Speculative construction normally would increase significantly in a market posting record low vacancy levels and record high lease rates. Developers in Orange County, however, will be handcuffed in 2001 by a scarcity of available land. Much of the 3.4 million square feet of industrial and R & D; construction that is planned for the upcoming year will be devoted to reuse projects in the North and Central County submarkets. One such project, the redevelopment of the Boeing facility in Anaheim, will add buildings in the 15,000-square-foot to 50,000-square-foot range, with little to no available competition. The lack of land also will stunt the future development of highly sought-after big-box distribution product. Reuse projects will dominate the radar screen of future Orange County development.
Although demand will weather the recent gyrations in the stock markets, a slight shift will occur in its origins. Internet companies, which led the charge in 2000, will take a back seat to traditional high-tech tenants, especially in the South County submarket. The continued re-emergence of Asian economies will boost exports, especially from the Orange County technology sector. Software, biotech and telecommunications companies will reap the rewards in 2001. In North and Central county, the focus will turn toward manufacturing and distribution companies. Tenant demand will increase with sustained consumer spending and increases in imports and exports.
Los Angeles
By any measure, the industrial real estate market in Los Angeles County enjoyed substantial growth through the fourth quarter. Sale and lease activity, average asking lease rates and occupancy all increased as the expanding local and U.S. economies generated strong demand for industrial space.
Market activity posted a significant increase, as sale and lease activity reached close to 46 million square feet by the end of the fourth quarter,triggering a 16% decrease in the vacancy rate from the fourth quarter of 1999. Transactions reflected a healthy blend of demand from expanding local firms and firms moving into the market.
While demand remained consistently strong among all LA County submarkets, industrial space under construction decreased 8% from the fourth quarter of 1999. This was due primarily to two submarkets taking a pause from a recent run of tremendous construction activity: North Los Angeles, which decreased 36%, and Mid-Cities, which decreased 58% from the fourth quarter of 1999. Still, these markets experienced year-over-year decreases in their vacancy rates of 34% and 17%, respectively.
Since 1996, the LA County year-end vacancy rate has been on a downward trend, with average asking lease rates going in the opposite direction. This is highlighted by the 54% year-over-year decrease in the vacancy rate and 11% increase in the average asking lease rate that took place in the San Gabriel Valley submarket. Demand for industrial space in this market has soared due to an increase in available space. Construction in this market was up 26% from the fourth quarter of 1999.
On average, every LA County industrial market is poised to capture the demand for its industrial space. Certainly, there will be challenges, as in the example of the Central LA submarket, where the vacancy rate increased a seemingly significant 154% from the fourth quarter of 1999, to 3.3%. Sale and lease activity in the submarket was down 28.4% from the previous fourth quarter because of a lack of available space, not demand. But construction was up 24% and average asking lease rates rose 30% year-to-year.
The expectation for Los Angeles in the next six months is a healthy loosening up of industrial product with moderately stable lease rates. Although development has been robust, preleasing has not been big this past quarter. There will be enough supply to meet demand but not enough supply to drive down lease rates on new product. Certainly, the new product coming on line will be an indicator on the health of the industrial market in LA.
Other Markets
Inland Empire: Tenants flocked to the massive Inland Empire industrial market during fourth quarter, posting 10 million square feet of sales and leasing activity. At the close of 2000, industrial activity levels and the completion of new projects maintained the bullish pace that was set at the start of the year, totaling 37 million square feet. Pre-leasing activity continued to take the newly completed projects off the market at a record pace. However, due to the large amount of pre-leasing (not included in net) the overall net numbers lagged behind. Users that captured more than 400,000 square feet each in the fourth quarter alone included Target, Wal-Mart, Perrier, International Paper and James River San Diego: The San Diego Industrial market benefited from the robust economy in 2000, recording net absorption of more than 7 million square feet, or more than double 1999’s net absorption, the previous record. The strong leasing activity caused the vacancy rate to decline for both traditional industrial and R & D; space. The countywide vacancy rate dropped 3 percentage points over the past year to 7.5%.
Houston
Shipping traffic has increased to the level that Houston’s Ship Channel now handles more than 65% of container traffic in the Gulf of Mexico. With a $387 million plan in the works, the Port of Houston Authority is seeking land for additional container and cruise terminals in the Southeast. The expansion is expected to strengthen the 50 million-square-foot industrial market in the area. Houston’s Ship Channel is not the only area benefiting from increased traffic with Central and South America: Continental Airlines recently broke ground on the $350 million, 550,000-square-foot Terminal E at George Bush Intercontinental Airport on the city’s north side. The new terminal, the largest facility expansion in the history of the airport, is set to open in summer of 2003, and will contain 15 to 20 new gates meant to accommodate additional domestic and international flights.
Industry headlines continue to reflect the draw Houston has for technology tenants. The attraction of affordable and widespread quality industrial space is evident by announcements such as Macfarlan Real Estate Services’ intention to redevelop the Fleming Foods warehouse into a high-tech data center in Northwest Houston. Fullarton Computer Industries, a Scottish manufacturing firm, recently selected Houston for a new computer manufacturing plant,again in Northwest Houston,with the ability to service Dell Computer Corp. in Austin and Compaq Computer Corp. in Houston. Fullarton’s 149,630-square-foot manufacturing facility in the West Little York Distribution Center will employ 300 people. The Wolff Cos., meanwhile, stated in the second quarter it will develop a 150-acre sit in west Houston called Westway Business Park, at Beltway 8 and Clay Road, with a distinctive high-tech orientation.
Other Markets
Albuquerque: Industrial development activity in the Albuquerque metro area totals more than $3.2 billion. Foremost among the 17 projects is the $2 billion Intel expansion in Rio Rancho. Other notable projects are the Philips Semiconductor retooling ($420 million), the new Eclipse Aviation plant ($300 million) and the Big-I interchange reconstruction ($270 million).
Colorado Springs: Historic high average asking rents for industrial properties. Development opportunities for industrial product exist.
Dallas-Fort Worth: Absorption gains continue to climb in the Metroplex, topping out at nearly 13.5 million square feet during 2000. Meanwhile, vacancy skipped up slightly during the fourth quarter as new product deliveries, totaling approximately 2.8 million square feet, were made with softer pre-lease commitments. East Dallas remains tight with a 3.4% vacancy compared to the DFW Airport submarket with the highest vacancy rate of 10.6%.
Denver: The big story in 2000 was the record absorption of 6.2 million square feet. The metro market played host to 12 leases of more than 100,000 square feet each, six of which were for more than 200,000 square feet. Lease rates increased a whopping 11%, proof that lenders and developers alike are not overbuilding like they did in the ’80s. The other significant story is that tenants who used to occupy space in the heart of the central market are now moving out toward Denver International Airport in the northeastern part of the metro area. Because of its great access to I-70, I-470 and I-225, it’s allowing distributors to avoid the upcoming seven-year road improvement project along the southern portion of I-25.
Eugene: Industrial market activity in the fourth quarter was extremely sluggish until the last few weeks of December. Very few properties larger than 20,000 square feet were available, as vacancy was low and absorption was holding its own.
Fresno: The Fresno industrial market recorded approximately 258,968 square feet of positive net absorption during the fourth quarter; this brought the year-to-date net absorption total to approximately 908,814 square feet. This total is down from the previous annual net absorption of approximately 2 million square feet. Vacancy rates remained stable.
Las Vegas: The vacancy rate for industrial space in Las Vegas is at a five-year low. There is a pent-up demand,particularly in the 5,000- to 10,000-square-foot and 15,000- to 25,000-square-foot ranges,among users desirous of owning their own buildings. This lack of product for sale will continue to put pressure on sales prices, with ranges now increasing to $75 to $95 per square foot, depending on the size of the facility. Lease rates should remain comparable to 2000 throughout the Valley.
Oklahoma City: New construction is continuing to outpace absorption. This trend is due to the fact that new space is being leased at high rates as soon as it’s completed. Overall, the market remains strong with a very low vacancy rate and new speculative construction continuing to transpire.
Phoenix: Industrial activity remains very strong throughout metro Phoenix despite economic slowing and numerous layoff announcements. Vacancy rates remain low, and construction and absorption activity is high, with stable rents. One trend that is squelching general industrial and warehouse development in several submarkets is rising land prices. However, this trend has not been detrimental as office and flex developers have continued interest in these areas. Following the trend of high land prices, there are preliminary discussions of redevelopment, although no major projects have been revamped.
Portland: Portland ended the year with record high net absorption of 5.3 million square feet and the lowest vacancy rate since 1995, 6.7%. Standout submarkets were the Sunset Corridor for flex space, which experienced 1.2 million square feet of flex absorption in 2000, and the Columbia Corridor for warehouse and distribution space, which ended the year with close to 1.3 million square feet of absorption. Land prices continue to escalate and speculative warehouse/distribution construction has all but ended because rental rates have not kept pace with land prices and development costs.
Reno: The Northern Nevada market is not overbuilt and therefore should be able to withstand an economic downturn, if it comes. Historically, an average of 3 million square feet of new space has been added to the market each year, and in 2001 developers are planning to construct 2 million square feet of speculative space. Building permits totaling 600,000 square feet have been pulled and it is not unreasonable to assume an additional 400,000 square feet will be built by the end of 2001. Rental rates for new bulk distribution space will be steady at $3.60 to $3.84. Mid-size space of 18,000 square feet to 40,000 square feet will rise approximately 5%, due to the increasing cost of tenant improvements. Smaller flex space experienced a 10% increase in rental rates in 2000 but should remain level through 2001.
Sacramento: Generally speaking, there was more energy geared toward construction this past year, but the region had faster absorption. Prices significantly escalated, driven by the decline in availability, as well as the onset of Bay Area and Southern California migrators. One reason for this may be that the average asking cost for 10 acres of zoned industrial land in Sacramento was $2.50 to $5 a square foot, compared with a range of $10 to $40 in the San Jose and Palo Alto areas. In the Sacramento region, the areas experiencing the greatest rate increases were predominantly the Roseville-Rocklin, West Sacramento, Northgate, and Sunrise submarkets, due to new development and low vacancy, as well as being the most desirable locations for a variety of tenants and users. These submarkets encompass a variety of businesses, shopping conveniences and affordable housing, which made them a prime choice for new buyers and tenants.
Salt Lake City: General industrial space in the 10,000-square-foot to 25,000-square-foot range has been in highest demand, while very small and very large spaces fail to attract many tenants. R & D;/flex space has enjoyed increased leasing activity, bringing down high vacancy rates.
San Antonio: Office service center absorption made up almost 90% of all industrial absorption in 2000 for the first time and the demand for flex space in San Antonio was particularly strong in the Northwest quadrant, where more than 300,000 square feet of absorption occurred. Some bulk tenants downsized during the year, while other tenants vacated property for ownership opportunities as the dominant Northeast sector experienced a strong 5% increase in vacancy in 2000. There are approximately a half-million square feet of new space under construction in San Antonio and, with total construction not likely to exceed 850,000 square feet in 2001, absorption should prove to be a little slower than the 473,410 square feet experienced in 2000.
San Jose: The area saw some softening in the fourth quarter, as expected, as evidenced by the large negative net absorption,particularly in the R & D;/flex product type. The pace of transactions has slowed considerably and rents have leveled off or even gone down. Although a lot of sublease space is being returned to the market, the demand is still there,the local economy is still growing, unemployment is very low, and the business diversity helps to insulate the overall market from suffering too much from the dot-com shakeout.
Seattle: During 2000, the technology boom fueled strong demand for fiber-ready warehouse space and helped propel the industrial market to record high asking rates and extremely low vacancy rates. But the region’s electricity woes could begin to play a role in limiting the growth of power-hungry data centers, approximately 30 of which are planned for the region.
Tucson: Tucson’s industrial market experienced a sixth consecutive year of equilibrium, with strong demand balanced by increasing supply. Build-to-suit activity was particularly robust, resulting in a slight vacancy increase in the multi-tenant market. Large tenants who moved into new, build-to-suit projects included Avent, Intuit, Whitmark, Excel (a logistics supplier for Motorola) and Plastics Moldings Co. Other significant transactions in 2000 included the announcement of a 550,000-square-foot Slim Fast build-to-suit manufacturing facility, a 70,000-square-foot lease by Cheng Fwa (a manufacturer of electronics components), a 210,000-square-foot lease by NexPak (an injection molding manufacturer of cassette, video and DVD cases) and a 105,000-square-foot Rainbird lease.
MIDWEST
Chicago
Rental rates in most markets remained level. This was due to the delivery of newly developed speculative projects in south and west suburban markets. There were markets, primarily infill areas around O’Hare and in DuPage County pockets, where rates trended upward to more than $5 per square foot, triple-net. The lack of product for sale in almost all markets created upward pressure on sale rates.
Inventory expanded, largely through development and redevelopment projects. In all, projects totaling more than 10 million square feet of space came on line in 2000. This level of activity was on par with activity levels in the late 1990s. Other contributors to increased market options were mergers, acquisitions and consolidations. In certain markets, near O’Hare, for example, this resulted in four substantial sublease offerings of more than 400,000 square feet.
Redevelopment and revitalization booms continue in the city and landlocked markets. In Chicago and in markets like West Cook County, there was significant redevelopment activity. Developers increasingly are replacing outdated, functionally obsolete buildings. With demand strong and incentive programs plentiful, projects under way included comprehensive renovations in addition to the preparation of some redevelopment parcels for new construction.
Other Markets
Cleveland: After years of strong growth despite gloomy predictions, the Greater Cleveland industrial market at last succumbed to a slowing economy and started to show signs of cooling. While the year began solidly, the second half was marked by a noticeable decrease in transactions with lease and sales rates remaining flat. The year was characterized by a continued string of mergers, acquisitions and bankruptcies, leaving the market with a glut of product and no significant increase in demand. The downturn was widespread, affecting for the first time in recent memory even the region’s traditional hot spots, such as Solon and Mentor. Despite a downturn in the overall market, vacant land continued to do well, with prices edging up slightly due primarily to more stringent environmental controls and a finite supply of vacant land. The actions of area developers and REITs gave a further indication that the boom has ended. While competition among developers remained fierce, land acquisitions and speculative construction slowed significantly. At the same time, many of the REITs operating in the Greater Cleveland market put large portions of their portfolios on the market. First Industrial was one of the first to leave the market, selling its entire Cleveland portfolio to focus its attention on other cities. Although Duke remained committed to the market, some of its holdings were offered for sale in an apparent attempt to raise money for the next wave of acquisitions. All in all, Cleveland’s industrial market slowed noticeably this past year. While a severe downturn is not expected, the year 2000 brought a new set of challenges that must be dealt with in the near future Columbus: Columbus almost set a record for new industrial construction in 2000 with the completion of just less than 6 million square feet, but absorption still exceeded construction. In 2001, absorption and construction will both slow down some with the economic “soft landing,” but the slowdown is not expected to be dramatic Detroit: The market experienced tremendous growth for its seventh consecutive year. The continued success of the automotive companies, their related spin-offs, and the expansion of the Detroit Metropolitan Airport were the primary contributors to the area’s success. Automotive downsizing and slower sales could affect the market in 2001. The Downriver and Airport submarkets received much of the new development in 2000, due in part to availability and the low cost of land. The year also saw several packages of income-producing industrial real estate portfolios trade hands. Dispositions by Prologis, First Industrial and Kensington Realty Advisors created more than 1.5 million square feet of transactions Grand Rapids: A continued tight supply of small- to mid-size (20,000 square feet to 80,000 square feet) facilities for sale. A slowdown in production of new spec bulk warehouses has allowed supply to reach a plateau. The hot spot has been flex/tech-type space Kansas City: The local market shows signs of slowing, both from prospective activity and new speculative construction starts. Rents are still firm; however, rental concessions are occurring on new, first-generation buildings. Deals are being made,just not as many as in the past. With the exception of Prologis, REITS are out of Kansas City and TA Realty continues to be the most active buyer of industrial buildings Omaha: A modest increase in absorption is anticipated through the first half of 2001, with the focus on flex space. Lease rates are expected to remain relatively stable St. Louis: Due to 2.1 million square feet of new industrial construction and 2.7 million square feet planned, the industrial market may experience a slight slowdown in the first two quarters of 2001. With all of this space available, there probably will be a drop in lease rates. It is hoped that the industrial users will continue to opt for the newer space, which has increased ceiling heights, wider column space and EFSR sprinkler systems South Bend: Vacancy rates continue to hover around 2.5%, but are expected to climb toward the end of 2001 due to the relocation of big-box users to new construction. However, sale and lease prices should remain unchanged Wichita: Demand continues to outstrip supply for modern space larger than 20,000 square feet. Spec building provided an additional 134,000 square feet in the second half. Rents rose slightly in the later half of 2000.
NORTHEAST
Boston
The strong economy in 2000 had the same effect on the industrial sector as it did on the office market. Vacancy declined sharply by 2 percentage points, to 5.3% in the 197.2-million-square-foot total market. After a relatively slow third quarter, the fourth quarter saw 2.9 million square feet of absorption, bringing the total for the year to 8.4 million square feet. In 1999, 5.9 million square feet were absorbed. Delivery of new space was 4.6 million square feet, only slightly higher than the previous year. While a minimum 25% decline in absorption is expected next year, the dominance of owner-built construction will continue to bolster the industrial market and the vacancy rate will show only a modest increase.
The mix of new product delivered in 2000 to the industrial market is instructive. Of the total 4.6 million square feet, 1.7 million square feet, or 37%, were build-to-suit and owner-built deliveries. The remaining 2.9 million square feet,63%,was speculative construction. Warehouse spec was 1.3 million square feet, mostly pre-leased. The R & D; sector had 1.2 million square feet, with telecom accounting for 1.0 million square feet. Virtually no “traditional” new speculative R & D; space was delivered. As a result, R & D; vacancy plunged to a record low of 4.2%, down by three points in a year. Rents for the best space soared to $15 per square foot, triple-net, by year-end, up from $9.75 per square foot in 1999. Prospects for large industrial users are bleak, unless there is a precipitous economic reversal.
Emerging companies developing fiber optics and switches, software, and high-tech tools for telecommunications and Internet infrastructure have flocked to the northwestern suburbs because Cambridge is full and Route 128 is expensive. R & D;/office vacancy fell by 3.1 percentage points to 4.2%, with rents jumping by 50% to an average $15 per square foot, triple-net, still a bargain compared with office rents.
M & W; vacancy continued its average 1 percentage point annual decline over the past three years to 6.1% overall. A 6.2% vacancy rate and lack of quality space forced average warehouse/distribution rents to $7.85 per square foot, triple-net, at year’s end.
Manufacturing vacancy dipped to 5.7%, while rents averaged $8.75 per square foot. Both sectors escalated by 25% during the year, eclipsing all previous rates of increase. Along Route 495, where rents for no-frills warehouse space in the past typically averaged $5 per square foot, rents were in the $6.50 to $6.75 per square foot range. In industrial markets north of Route 128 to Route 495 North, rents approached $9 to $10 per square foot, if tenants were able to find space. Inside Route 128 to the north of Boston, rents exceeded $12 per square foot, triple-net.
R & D; construction of 2.5 million square feet included 1 million square feet of telecom space. The 2.3 million-square-foot telecom sector was 75% occupied, and 3.4 million square feet of telecom space is under construction. At year’s end, some pre-leasing commitments evaporated. As a result, another 3.6 million square feet of identified potential development may now be deferred or canceled. The effect of the softening of telecom demand on the overall market should be minimal, however, because telecom space accounted for just 3% of the total R & D; market and will be only 7% at the end of 2001, based on scheduled deliveries.
Forecast: Warehouse/distribution construction will provide less than 1 million square feet of new speculative product, while the remaining 1.3 million square feet will be build-to-suit and owner-built. This product will be on developer-owned sites along Route 495 south and beyond in Fall River and New Bedford or west of Worcester. Manufacturing construction will be confined to owner-built deliveries in Andover, Ayer, Hudson, Milford and Bellingham. Telecom will dominate R & D; construction, accounting for 70% of the 5 million square feet of R & D; projected for delivery in 2001.
Other Markets
Long Island: The Long Island industrial market ended the year noticeably tight. The level of activity continued to be strong in the area of modernization of existing buildings and expansion of facilities with opportunities for users and investors still remaining. Much of Long Island’s market activity can be attributed to the increased presence of new economy companies New Jersey: 2000 marked the eighth consecutive year of economic expansion in New Jersey, which has prompted record levels of industrial leasing activity. The industrial availability rate had tumbled below 3% at the end of 2000, as nearly 7.6 million square feet were absorbed during the year. Nearly 90% of the 7.9 million square feet under construction consisted of big-box warehouse space to accommodate the needs of rapidly expanding logistics and distribution companies Philadelphia: The industrial marketplace throughout the greater Philadelphia area continued to see strong numbers for the fourth quarter. Industrial vacancy rates have been dropping since the second quarter of 1999, from 7.9% to the present rate of 5.9%. All of the Philadelphia-area counties reported lower-than-normal vacancy rates, with Chester County on the lower end at 2.5% and Delaware County on the upper tier at 10.1%. These low vacancy rates are driving construction levels to new heights. Build-to-suits and owner-built properties in the greater Philadelphia area, combined with speculative development, have pushed industrial building construction to approximately 3.9 million square feet Pittsburgh: Pittsburgh contains abundant industrial product, though the majority of space is class C and below. The lack of class A and B industrial space is a limiting factor in the Pittsburgh region’s economic expansion. Several submarkets are in desperate need of quality light industrial flexible inventory Washington, D.C.: The wave of uneasiness sweeping over the high-technology industry clouds predictions for the next couple of years. If a major consolidation trend develops, there may be a substantial increase in available sublease space, lower rents, less construction and greater landlord concessions,at minimum. High-tech tenants occupy approximately half of all flex space in the metropolitan area. Predicting demand for a non-traditional industry composed of such a high number of firms with nonexistent or even negative earnings is a difficult task.
SOUTHEAST
Atlanta
The Atlanta industrial market absorbed more than 4.6 million square feet of space in the fourth quarter and absorbed 13.9 million square feet for the year. This absorption total was Atlanta’s highest since 1994 and occurred despite predictions of an economic slowdown. South Atlanta and Northeast led the Atlanta submarkets in absorption with 4.5 million and 4.4 million square feet of space, respectively. In addition, deliveries in the Atlanta market totaled more than 16.4 million square feet of space for the year, with owner-occupied space accounting for more than 1.9 million square feet.
By year’s end 2000, the Atlanta market had more than 10.6 million square feet of space under construction. The Northeast led all submarkets with more than 3.6 million square feet of space under construction, with South Atlanta closely following with 3.5 million square feet. Fulton Industrial reported a surprising 2.5 million square feet of construction activity. Strong absorption helped to reduce the overall vacancy rate to 8.6%, compared with the 9% vacancy rate at the end of the third quarter. The smaller submarkets of Snapfinger and Chattahoochee recorded the lowest vacancy rates, at 5.6% and 5.7%, respectively.
For the next six months, overall vacancy rates are expected to increase by a full percentage point, despite about 5 million square feet of net absorption. Rents are expected to remain flat as supply catches up with demand. About 10 million square feet is expected to be under construction by June.
Other Markets
Charlotte: As the economy slows down slightly, demand for industrial space should taper some, forcing vacancy rates higher through 2001. Developers should continue to develop industrial space, albeit at a much more cautious pace. Vacancy rates should peak at as high as 13% before moving back down at the end of 2002 Jacksonville: As indicated by the moderate vacancy rate, Jacksonville typically has a healthy balance of supply and demand. Construction of new speculative space will slow in 2001, but as the Better Jacksonville Plan (approved to spend over $2 billion for infrastructure, economic development, etc.) commences, Jacksonville will be recognized as a desirable Southeastern distribution point Louisville: Sale and leasing activity fell in each successive quarter during 2000 from a 1.8 million-square-foot first quarter to a 498,000-square-foot fourth quarter. Net absorption for the fourth quarter was a negative 672,641 square feet. Overall vacancy for the quarter was 17.5% Nashville: Construction and leasing activity swells for big-box space on the I-24 corridor in Smyrna and LaVergne. The East submarket, in Wilson County along I-40, is chasing the Southeast’s popularity. More projects are breaking ground near Dell Computer’s facilities Orlando: The Orlando industrial market topped 90 million square feet of inventory in 2000, a milestone for central Florida. Logistics and retail distribution centers have fueled industrial growth in the region. Lake and Polk counties are rapidly becoming choice locations for industrial tenants looking for a central Florida address Raleigh-Durham: The flex sector remains incredibly tight with little relief in sight for 2001. Many of the new buildings coming on line have been pre-leased well in advance of delivery. The warehouse sector, however, continues to struggle with rising vacancies as the Research Triangle Park area become more service-oriented and less manufacturing-oriented Richmond: The industrial market finished on an optimistic note, ringing up 766,000 square feet of absorption for the quarter and more than 2 million square feet for the year. The year’s biggest investment and construction news came when Infineon (formerly White Oak) Semiconductor began immediate construction of a long-awaited 500,000-square-foot expansion of its plant near I-295 and I-64. Although absorption was high in the fourth quarter, the number of deals in the pipeline slowed, signaling a likely continuation of slower, but steady growth Tampa Bay: The Tampa Bay industrial market continued to outperform previous years’ activity. The Bay area added more than 1 million square feet of industrial space and absorbed 1.5 million square feet net. R & D;/flex product, otherwise known as logistics industry product, dominated the absorption. Toward year’s end, the economy indicated signs of a minor slowdown. Industrial activity followed suit, mainly attributed to dot.com companies experiencing a shakeout rippling throughout the market.
