Real estate brokers seeing more activity in industrial arena
Nonresidential real estate activity has been slow to bounce back from the recession-related malaise, according to brokers in the field.
But insiders are noticing a smattering of activity in industrial real estate sales and leasing that could portend a comeback.
The health of the manufacturing space market is key because, with more than 280 million square feet of space under roof, the market for manufacturing and distribution facilities is about 10 times the size of the office market in southeastern Wisconsin.
According to figures from the Chicago district of the Federal Reserve, nonresidential real estate activity was stagnant here. Demand for office space remained weak, and vacancy rates continued to rise slightly.
Commercial activity was noted by the Fed, but was attributed mostly to lease renewals and tenants shuffling around rather than to new demand. However, one contact in the Chicago area reported a sharp increase in the number of office property tours compared with a year ago, though that had not yet led to any net absorption.
As a result of continuing weak demand, most companies reporting on office space activity have pushed back their forecasts for a recovery in their markets.
While the Fed and census data reflect a flaccid market for industrial and light industrial real estate, brokers report a change in attitude among buyers that could indicate a turnaround predicted at the International Real Estate Management (IREM) Economic Forecast Breakfast earlier this year.
At the annual January function, CenterPoint Properties Vice President Tim Casey said industrial vacancies – hovering at the time at about 6% or 7% – would see modest first quarter improvement, gaining momentum in the second and third quarters.
"About 63% of metro Milwaukee manufacturers project sales increases, compared to 66% of non-manufacturing companies," Casey said. "So I think overall, vacancy will decrease throughout the year. Rates will stabilize and maybe start to climb."
While brokers say action has been heavier on the sale side than on the lease side, the tide seems to be turning for industrial space as the number and size of offers picks up.
"The industrial market is getting stronger," says Sam Dickman Jr. of The Dickman Company. "We are actually seeing people put offers in on buildings that are reasonable," he said, indicating that many offers over the ensuing months have been low-balled. "Speculators are coming back into the market, and that is a good sign."
"There are still come people out there trying to submit lower offers. I would say there are more legitimate offers," MLG Commercial principal Barry Chavin said. "With industrial, we are starting to see a glimmer of hope. There are more people out there looking. People are cautiously optimistic and are just beginning the process of looking at whether it is moving or building. There are more offers being made, but there is a direct correlation with the fact that there are more people out there looking."
"This has been my busiest week of the year," noted David Lange, vice president in charge of industrial space for Apex Commercial, Brookfield. "I am actually getting a fair amount of activity from other brokers in the 12,000- to 25,000-square-foot range, mostly on the buy end. The lease end is still slow, but there, I have noticed an uptick as well. I am working on several lease deals. There are some bigger deals that are starting to pop back up on the market."
July 11, 2003 Small Business Times, Milwaukee
