Monday, February 4, 2013

On the Mend: Industrial Sector Makes Quiet but Important Strides in 2012



Michael Bull
ATLANTA, GA (Feb. 4, 2013) – Buoyed by a slowly strengthening economy, the U.S. industrial sector experienced noticeable improvement last year and could take another significant step forward in 2013.

 That was the consensus of a panel of experts on the most recent episode of the “Commercial Real Estate Show” radio program, hosted by Michael Bull of Bull Realty. The episode took an enlightening look at the sector, examining vacancy rates, investment sales, and the factors that could help or hinder industrial properties in the months ahead.

Ryan Severino
The national vacancy rate for the warehouse/distribution subsector dropped about 80 basis points in 2012 to end the year at 12.3 percent, said Ryan Severino, senior economist for Reis. Asking and effective rents for the properties both grew approximately 2 percent last year.

 The flex/R&D subsector finished last year with a 13.9 percent vacancy rate, a 120-basis-point decline from 12 months earlier, Severino added. Asking and effective rents both increased by about 1 percent in 2012.

 “Industrial had a pretty good year, all things considered,” Severino said.

Larry Callahan
Looking ahead to 2013, Severino said growing e-commerce sales and an improving home market could increase demand for the warehouses and distribution centers that store and ship related products to consumers.

“On the other hand, a slowing of global trade triggered by European economic woes and any future contraction in the U.S. economy could harm the sector, he added.“ But as long as we’re in a slow, stable growth environment, I think there should be good, if not spectacular, times ahead for the industrial market,” Severino concluded.

 Developer Larry Callahan, CEO of Pattillo Industrial Real Estate, said big-box distribution centers 300,000 square feet or larger areexperiencing the most tenant demand among industrial properties. The industrial sector also has improved enough that significant spec construction could be on the horizon, he added.

Summey Orr
“The rental rates are starting to move up, and [spec development] is starting to make more sense,” Callahan said. “Some is actually happening in the hotter and tighter markets, like some places in Texas and California.”

The market for flex/R&D buildings 300,000 square feet or smaller – the kind of facilities traditionally occupied by small, entrepreneurial firms – is still relatively flaccid, Callahan added.

 Commercial real estate attorney Summey Orr, managing partner of Hartman Simons, said corporations are growing more confident about theirprospects and about adding warehouse and distribution space.

 “Towards the end of 2012, you were seeing [corporate real estate managers] going to their bosses and saying, ‘Hey, we’ve been bursting at the seams for two and three years,’” Orr said. “‘It’s time to get more space.’”

 “I think we’re going to see more of that in 2013 and certainly more of that in 2014,” Orr added.

 The entire episode on theU.S. industrial market is available for download at www.CREshow.com.

 The next “Commercial Real Estate Show” will be available Feb. 7 and will examine the U.S. multifamily market.

 For a complete copy of the company’s news release, please contact:

Stephen Ursery
The Wilbert Group
Office: (404) 965-5026
Cell: (404) 405-2354


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