By Jarrett Hicks, Senior Research Analyst
A key development in the third quarter was the 1.5 million square feet of new construction deliveries. Over 1.3 million square feet of the deliveries were speculative bulk projects in Richwood, KY and West Chester, OH. Over and above the delivered space, a sizeable 3.1 million square feet of industrial space is currently under construction across the region, the majority of which is speculative bulk product in Northern Kentucky. Dermody Properties’ 898,560 square foot LogistiCenter 275 in Erlanger, which has been pre-leased by Wayfair, broke ground in Q3. IDI Gazeley also recently broke ground on the 442,304 square foot Park South at Richwood I.
After a 15-year low of 4.42% in the second quarter of 2015, overall vacancy in Greater Cincinnati increased slightly to 4.57%. With the delivery of over 1 million square feet of new bulk warehouse space, quarter-to-quarter Class A bulk vacancy increased from 1.3% to 3.1%. Conversely, Class B bulk vacancy decreased by more than 100 basis points since last quarter, due to leases in the Central and Northern Kentucky submarkets. Vacancy was virtually unchanged in the other product types since the last quarter.
Despite low vacancy, net absorption remained positive for the 17th consecutive quarter, reaching 1.0 million square feet in the third quarter. Net absorption for the year now stands at 4.6 million square feet, which is extremely close to the level of net absorption of the entire year 2014.
In the third quarter, ten bulk warehouse leases over 100,000 square feet occurred across the region. The largest of these was a 448,098 square foot lease by Pratt Industries at the newly-delivered Park South at Richwood A. Among other new leases of the quarter, Cincinnati Bell leased 110,000 square feet at Highland Park in Norwood, OH. Monoprice leased the remaining vacant 104,000 square feet at Park West International E in Hebron, KY.
Twelve building sales of over $1 million closed in the third quarter of 2015. As part of a four-property Midwest portfolio sale, Lincoln Property Co. purchased two large properties in West Chester, OH from Clarion Partners for a combined $17.7 million ($59/SF). The largest owner-user sale of the quarter was Haggerty Logistics’ purchase of the 129,515 square foot former Continental Can Facility in Springdale, OH for $2.3 million ($18/SF).
Looking ahead, overall vacancy should remain below 5% for the foreseeable future, despite a large number of building deliveries expected in the next year.
To read the rest of the Third Quarter 2015 Cincinnati Industrial Market Snapshot click here.