Industrial real estate market trends down

August 31, 2009
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To almost no one's surprise, the overall vacancy rate in the industrial real estate market rose by a tad more than a point during the first half of the year.

According to CB Richard Ellis/Grand Rapids, the unoccupied space in Kent County reached 11.1 percent at the end of June — up from 10.0 percent at the end of 2008.

Despite the increase, vacancy here was below the national average of 12.4 percent at the year's halfway mark. The overall vacancy rate includes owner-occupied and leasable space.

But when leaseable space, which accounts for 55 percent of the market's total square footage, is isolated, the vacancy rate climbed to 17.9 percent, up from 16.3 percent for the fourth quarter of last year. Still, the report notes that increases have been higher in markets elsewhere in the state.

"One reason the area has fared better than average is the diversified manufacturing base — only three of the top 10 manufacturing employers are directly related to the automotive industry," noted Jill Langosch, CBRE/GR vice president of research, of Steelcase, Amway and Herman Miller.

Small to medium-sized auto parts makers, though, haven't fared as well over the first six months.

"Abrupt sales declines and tightened credit conditions have made it difficult for many to sustain their business pending an economic recovery, thus resulting in additional properties (becoming) available in the market," reported Langosch.

The county's highest vacancies are in the southeast submarket. The least amount of unoccupied space was in the Central Urban Area, an industrial sector just outside the Central Business District.

Overall, 1.1 million square feet of space became available during the first six months of this year. Rental rates fell too.

The CBRE/GR report said leasing activity remains slow. The report, compiled by CRBE Economic Advisors, also predicts that vacancies will continue to rise slightly next year and a few large owner-occupied facilities will soon become available. More vacancies will put more pressure on an already-stressed industrial market.

As for a future recovery, Langosch felt the majority of new activity will come from the health care, contract manufacturing and food processing industries.

"In addition, state tax incentives have provided alternative energy a promising future in Michigan," she noted, "and the area's large manufacturing work force is primed to make the most of all these opportunities."

The Indy Market Numbers

Here are the vacancy rates for the industrial real estate market for the first six months of this year.



Submrket
CUA
Northeast
Northwest
Southeast
Southwest
Total Market

Gross
Area S.F.

8,885,640
6,036,387
16,379,630
43,819,760
21,997,277
97,118,694

   Gross
Vacancy Rate

5.1%
11.4%
10.3%
13.7%
8.9%
11.1%

   Leasable
Area S.F.

5,590,151
3,311,601
7,816,034
24,663,439
12,272,456
53,653,681

   Leasable
Vacancy Rate

7.4%
15.7%
20.4%
22.5%
12.7%
17.9%

Note: CUA is Central Urban Area, industrial space just outside the Central Business District.

Source: CB Richard Ellis/Grand Rapids, Grand Rapids Industrial MarketView, Second Quarter 2009

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