The industrial real estate market is currently thriving and stands as one of the most robust sectors within the commercial real estate industry.
“There is widespread demand and historically low vacancy across the country,” says Maureen Anter-Ressler, a Senior Associate at Cushman & Wakefield | CRESCO Real Estate. “And because of those two factors, both the rental rates and the purchase price of industrial property have climbed. That’s created a tight, challenging market for both tenants and buyers.”
This trend of high demand and low vacancy rates is not exclusive to the broader market but has also impacted the Northeast Ohio region. Individuals and businesses in need of new, modern properties, or those requiring expansion to accommodate their growth, are facing difficulties in finding the suitable space they require.
Smart Business spoke with Anter-Ressler about the Northeast Ohio industrial real estate market, how it compares to other markets and strategies to land the right property.
How does the Northeast Ohio market compare to others across the country?
It’s interesting to see that Northeast Ohio, a tertiary market, is experiencing the same issues as first-tier markets such as Los Angeles and Dallas. We’re seeing a scarcity of commercial industrial products, high rental rates and historically low vacancy.
Where they differ, though, is that first-tier markets are seeing something like 15 million square feet of new, annual industrial construction, while Northeast Ohio has had just over 4 million under construction. That’s a big number in Northeast Ohio, but it’s essentially the output first-tier markets are seeing in a single quarter.
What challenges exist in the Northeast Ohio market?
One major issue right now is the limited availability of land in Cuyahoga County, which is pushing developers to search for options further out. But even when they expand their search, they can run into some roadblocks. For instance, wetlands can be a real headache because they restrict the amount of land that can be developed.
Another thing to consider is that Northeast Ohio consists of many small municipalities, and each of them has its own set of laws, review processes, and approval procedures. This means developers have to navigate through a whole lot of red tape, which can slow down projects and add extra hurdles to overcome.
What’s going well?
Essentially everything is going well for landlords. In the first quarter of this year, the vacancy rate for industrial properties in Northeast Ohio was 2.9 percent, which is not likely to soften over the next 12 to 18 months. The good news for tenants, though, is we’ve got more than 4 million square feet of industrial properties currently under construction in Northeast Ohio. When those properties come online, it’s going to provide some much-needed relief to the tight market.
Another thing that’s going well, and is pretty interesting, is that the tightness in other parts of the country is actually benefiting areas like Northeast Ohio. More and more businesses are setting up shop in secondary and tertiary markets, and Northeast Ohio is one of those markets reaping the benefits. So, operations are taking root here, which is a big win for the region.
How can those seeking industrial real estate get what they’re looking for?
It’s a competitive market out there. When a property becomes available, you need to be prepared to face multiple offers from other buyers. That means you might have to make some compromises on your terms to stay in the game. For example, you might have to let go of that 60-day due diligence period and settle for a 30-day inspection period instead.
If you’re in the market for industrial real estate, get the ball rolling right away. Team up with a savvy broker who’s always on the lookout for opportunities. Having someone like that on your side can give you a real edge, especially when time is of the essence. ●
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