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Industrial Surges Outside the Hubs

KANSAS CITY—A survey among SIOR industrial professionals ... points out that it meets the fundamental requirements of real estate success, namely location, location, location. “We sit at the intersections of Interstates 80 and 29; that’s a huge ...

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It doesn’t exactly hurt that it’s new product, built to satisfy modern requirements“Everything that’s going up is state of the art, 32-foot clear heights,” says Orschein“A lot of it is larger products, so we’re seeing a lot of 300,000-square-foot-plus buildings going up, a lot of cross-dock bulk buildingsA couple of developers will be coming on line with 200,000-square-foot single-loaded buildings to satisfy the demand from the smaller users as well.” Geographically, Omaha is “literally at the center of the country,” says Kerrigan Farther west is Omaha, which at 68 million square feet represents the smallest industrial market in the SIOR surveyYet Tim Kerrigan, CCIM, SIOR, a VP with Investors Realty Incin Nebraska’s largest city, points out that it meets the fundamental requirements of real estate success, namely location, location, location“We sit at the intersections of Interstates 80 and 29; that’s a huge advantage,” he tells“Geographically, it’s literally at the center of the countryIt puts us within a one-day delivery time of a huge part of the US market.” Although Kerrigan says there’s no evidence yet of Amazon establishing its presence in the area, he thinks it’s fair to assume that there will be, sooner or later.“There’s a lot of territory in the Plains states; if we’re truly going to do same-day deliveries to in business-to-business and consumer-to-consumer, somebody’s going to have to build facilities in Omaha and the surrounding area.” While Omaha may be best known as the home of Warren Buffet’s Berkshire Hathaway empire, Kerrigan notes that the market is “fast on its way to becoming a hotbed for data centersYou don’t see more than a handful of these huge, $200-million enterprise centers in any given year, but Omaha has had two in the past three years, and we have more in the pipeline.” Although Chicago isn’t all that far from Milwaukee, the seven-county region of southeast Wisconsin has become a key industrial market in its own right“What we’ve seen in the past seven years of recovery is remarkable strength, and I think you’re seeing it across the US,” Jeff Hoffman, SIOR, CCIM, a principal with Cushman & Wakefield/The Boerke Coin Milwaukee, tells“We have a stock of 275 million square feet, and our vacancy rate is down to 4.1%.” Cushman & Wakefield’s Jeff Hoffman cites the “remarkable strength” of the industrial recovery It’s even lower in some of the region’s submarkets, such as Mitchell Airport with vacancies of just 2.2%.  “You can’t remember a time when markets have been compressed that low,” Hoffman says One challenge has been the manufacturing sector, which has been hard-pressed recently“The state of Wisconsin jockeys back and forth with Indiana as the state with the highest dependence on manufacturing for private-sector employment,” says Hoffman“A lot of our large manufacturers since last August or September have been in flat-out recessionary enviromnentsWe supply a lot to the oil and gas industry, so your local machine shops have been hit hard.” That being said, absorption locally continues to outpace new deliveries, Hoffman saysThe gap has been filled by and large with warehouse-fulfillment, on both the business-to-business and business-to-consumer sides Another fundamental of commercial real estate, asking rents, has seen year-over-year increases nationwideHowever, Kerrigan says, “We’re seeing rental rates rise across the market, but still not keeping pace with the cost of constructionI would presume that construction costs have increased at an increasing rate everywhere, certainly in our marketSo people are trying to understand the disconnect between rental rates and construction costs.” .slideshow { padding: 0 0 15% !important;} h3.slide_caption {position:absolute; bottom:inherit;width:95%;padding: 25px 10px 5px !important;} Paul Bubny › Paul Bubny is managing editor of Real Estate Forum and GlobeSt.comHe has been reporting on business since 1988 and on commercial real estate since 2007He is based at ALM Real Estate Media Group's offices in New York City. 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