Last year, industrial
markets enjoyed a long
awaited renaissance of new
construction. That won’t
change in 2016, with most
SIOR professionals reporting
traditional industrial markets
blooming and new locales
blossoming.
Industrial markets, big and small, experienced significant gains in 2015, and if the
prognostications are correct, SIOR specialists should expect another busy year
in 2016.
Analysts on the Building Design +
Construction website looked at numerous
surveys and concluded industrial construction will be up 9. 9 percent in 2016, the
third busiest commercial real estate sector behind office and hotel development.
Meanwhile, the MAPI Foundation’s U.S.
Industrial Outlook, a quarterly report
that analyzes 27 major industries, says
industrial product will be up about 3. 3
percent for the first half of 2016. The biggest growth will come in computer and
electronics products, followed by general
manufacturing and finally non-high-tech
manufacturing.
For a boots-on-the-ground look at industrial markets across North America, SIOR
Report checked in with SIOR professionals
in primary, secondary and tertiary markets, and the consensus is 2016 will be a
continuation of healthy construction trend
lines established in the past few years.
A number of SIOR industrial specialists
reported new development activity hasn’t
been this good since before the recession.
“Kansas City is on fire right now,” exclaims
Joe Orscheln, SIOR, CCIM, a vice president
in the CBRE office in Kansas City.
“2015 was a good year to be in real estate,”
comments Norm Khoury, SIOR, CCIM, a
senior vice president and principal for
Colliers International in Cincinnati, Ohio.
“Things look good for 2016 and beyond,”
predicts David Liebman, SIOR, JD, LEED
Green Associate, a managing broker with
Merit Partners LLC in Chicago, Ill.
The responses from SIOR industrial specialists were almost 100 percent positive
concerning development for 2016. So let’s
take a look at where the new development
opportunities for 2106 will be in specific
locales.
Tertiary Markets
Although a lovely city, home to investor
exemplar Warren Buffett and his mighty
Berkshire Hathaway company, at just 66
million square feet of industrial market
space, Omaha, Neb. is the smallest market
in this eclectic survey.
New, commercial development of note has
been in two sectors, most notably, office,
which has a 4 percent vacancy in Class
A space and 12 percent in Class B. Last
year saw such ground up developments
as a 125,000-square-foot build-to-suit for
Pacific Life, a 90,000-square-foot medical
office and the announcement of a new
300,000-square-foot corporate headquarters for HDR, the large architectural and
engineering firm, reports Tim Kerrigan,
CCIM, SIOR, a vice president with Investors
Realty Inc. in Omaha.
Industrial vacancies are a low 2. 3 percent
in Omaha and construction was started
on five new flex buildings in 2015 totaling
approximately 400,000 square feet. “We
expect to see more construction in 2016,”
says Kerrigan.
The big surprise is that Omaha has become a “hotbed” for data centers. In the
past two years, Travelers Insurance and
Fidelity Investments have each built $200
million data centers in Omaha, joining a
very long list of companies such as Yahoo,
Google, PayPal, Century Link, First Data
and Verizon that have data centers in the
area. Even Major League Baseball keeps
its most prized data in Omaha.
What’s the secret in becoming a data
center hotbed? “We are a good location because we have high-quality and affordable
power, low risk of natural disasters and a
strong incentive package from the state,”
says Kerrigan. It also doesn’t hurt to have
a fantastic communications infrastructure, courtesy of the nearby US Strategic
Command (USSSTRATCOM) at Offutt Air
Force Base.
Secondary Markets
Talk about surprising. For secondary
markets, the big news is that the industrial market in many older Midwest cities
are not only thriving but are buoyant and
those who toil in the commercial real
estate world are looking forward to even
more new development in 2016 and the
coming years.
Before SIOR Report tackles the Midwest, its
first stop is also in the middle of the country, but much further south in Texas, where
we can find the blossoming, tech-loaded
city of Austin.
It will be no shock to anyone when Matt
Levin, SIOR, a managing principal with
ECF/Equitable Commercial Realty in
Austin, says, “in 2015, our company blew
away by a wide margin every record we
had; from a personal standpoint most of
us had our most productive year ever.”
Good tidings won’t change much in 2106 as
the pipeline just for office is for another 2
million square feet.
