In its recently published 2011 Year End Market Report, Milwaukee-based commercial real estate brokerage The Dickman Company Inc. predicts that the metro Milwaukee area’s industrial real estate market will continue to gain strength in 2012 with declining vacancy, increased absorption and stable lease rates.
"The industrial real estate market for 2012 looks positive," the report states. "Based on the available data and our experience in the marketplace we anticipate the year will have a strong volume of sales and leasing activity for industrial product."
The Milwaukee area’s industrial real estate market had net positive absorbtion of more than 3 million square feet of space in 2011 and the vacancy rate fell from 8.4 percent at the end of 2010 to 7.5 percent at the end of 2011, according to Xceligent.
However, absorption slowed in the fourth quarter of 2011 to 270,218 square feet compared to 1.15 million in the third quarter.
"We expect this lower rate of positive absorption to continue well into 2012," the Dickman Company report said. "The rate of deal velocity has slowed for a variety of factors, including uncertainty locally (recalls), nationally (2012 Presidential election), and internationally (oil prices, Euro zone, Middle East)."
As the vacancy rate has fallen, the amount of quality available industrial space in the region has become scare.
"Companies that are geographically driven will find fewer options, conflicting with the general expectation among users for a great deal," the Dickman Company report said. "Product inventory remains high for warehouse and flex space, but generally low for manufacturing facilities in the region."
More sales of bank owned properties will occur in 2012, the Dickman report says.
"Banks will continue to play a part of the industrial real estate market as they dispose of troubled properties," the report says. "The properties sold by banks have played a dampening effect on sales comparables, as the ultimate sale price is more correlated to the bank’s position in the property than its true market value."
Another byproduct of falling vacancy rates is that leasing packages for tenants will continue to become less aggressive, the Dickman report says.
"Previously, it was common to receive several months of free rent corresponding to the term of the lease. In the industrial market, free rent is still prevalent but to a lesser degree," the report says. "Landlords prefer to give free rent in lieu of a lower lease rate in an effort to hold the line on property values."
