In its annual industrial real estate market overview and forecast, Milwaukee-based The Dickman Company Inc. predicts that the region’s industrial real estate market will gain additional strength in 2013.
Strong fundmentals, primarly low vacancy rates and a steady absorption pace, indicate that the region’s industrial real estate market should outperform the overall economy said Brian Parrish, vice president and partner for The Dickman Company.
The southeastern Wisconsin industrial space vacancy rate fell from 7.4 percent at the end of 2011 to 6.5 percent at the end of 2012, according to Xceligent. The region absorbed 3.65 million square feet of industrial space in 2012, according to Xceligent.
Dickman Company, one of the most prominent industrial real estate brokerage firms in the Milwaukee region, predicts the area’s industrial real estate market will experience positive absorption, declining vacancy rates, build-to-suit and speculative development, increasing volume of sales, higher sale prices, higher lease rates and fewer lease concessions in 2013 and beyond.
As part of its report, Dickman Company surveyed 10 industrial real estate developers (CenterPoint, First Industrial, HSA, HSI, Design 2 Construct, Opus, Irgens, Briohn, General Capital and Wispark). Of the developers surveyed, two said they would consider a speculative industrial development in 2013. Two others said “maybe,” and the other six said they would not.
Nine of the 10 developers surveyed said there will be build-to-suit opportunities for industrial real estate developers in the region this year.
A few additional developers said they would consider spec developments with some amount of pre-leased space as opposed to a 100 percent spec project, Parrish said.
“The developers are definitely risk-adverse,” he said.
When asked what is the least saturated southeastern Wisconsin submarket and best opportunity for new industrial development three develoers said Racine, three others said “Racine/Kenosha,” three said Waukesha and four said “other.”
Waukesha has a 4.1 percent vacancy rate, down from 5.0 percent at the end of 2011. Racine has a 3.1 percent industrial space vacancy rate, down from 3.5 percent at the end of 2011. Kenosha has a 9.4 percent vacancy rate, down from 11.1 percent at the end of 2011. However, Kenosha’s vacancy rate is disceptively high, Parrish said.
“It’s only that high because there is quite a bit of older, functionally obsolete space,” he said.
In recent years Kenosha has been a hot bed for development of new warehouse and distribution facilities, including several companies that have moved operations north from the Chicago area.