The renewed strength of the automotive industry and the Metro Detroit economy continue to propel the industrial market. Metro Detroit’s industrial vacancy rate fell 40 basis points to 10.3% during the third quarter of 2013. This marks nearly three full years of quarterly positive absorption, according to a new report by Newmark Grubb Knight Frank (“NGKF”). Since the fourth quarter of 2010 the vacancy rate has declined 5.4 percentage points. Meanwhile, the industrial market is growing faster compared to last year. As of the third quarter 2013, year-to-date absorption is at 5 million square feet, surpassing the 2012 absorption total of 4 million square feet.
With 466,000 square feet of absorption, Southern Wayne County was the strongest performing submarket, ending the quarter at 9.9% vacancy. Large-block warehouse/distribution facilities are seeing high demand, yet smaller multi-tenant facilities have higher vacancy levels. The current vacancy rate for 10,000- to 60,000-square-foot facilities, particularly near Metro Airport, is 13.4%; that rate has only dropped 140 basis points in two years. In comparison, large-block warehouse/distribution facilities greater than 100,000 square feet have seen the vacancy rate drop from 18.9% to 9.3% over the past two years.
Sean Cavanaugh, associate broker, said, “Demand for large-block warehouse/distribution facilities is overshadowing smaller, multi-tenant and free-standing light industrial product. Landlords are hoping the shortage of available buildings in other submarkets causes companies to take a closer look at available facilities in Southern Wayne County.”
Western Wayne County’s industrial vacancy rate fell 10 basis points to 9.4% during the third quarter. Just over 38,000 square feet was absorbed during the quarter and roughly 465,000 square feet has been absorbed year to date. Two notable deals were Fabrication & Design Inc.’s 75,000-square-foot lease on Capitol Street in Livonia and Czarnowski Display Service Inc.’s 55,000-square-foot lease on Polaris Court in Plymouth.
The R&D/flex market is growing in Northville, where automotive parts manufacturer AISIN leased 172,000 square feet of R&D/manufacturing space on Centennial Drive. It will occupy the space in the fourth quarter of 2013. The vacancy rate for Western Wayne’s R&D/flex market has dropped steadily, falling from 12.5% two years ago to 10% in the third quarter of 2013. Developers are taking note of this trend and are buying land for future development; for example, 54 acres at Five Mile & Beck Roads in Northville was recently purchased for future research and technology uses.
Southeastern Oakland County’s industrial vacancy rate fell 90 basis points to 8.1%, marking just over 670,000 square feet of absorption during the quarter and over 1.2 million square feet year to date. User sales were also strong in this submarket: Two notable transactions were Energy Products’ 118,000-square-foot purchase of the 1551 E. Lincoln Avenue building in Madison Heights and Lawrence Plastics’ purchase of a 117,000-square-foot building at 6338 Sashabaw Road in Independence. The Southeast Oakland submarket is well on pace to meet 2012’s overall absorption levels, which were just over 1.4 million square feet.
Geoff Hill, senior managing director, said, “The industrial market in southeast Oakland County has continued to improve throughout 2013 spurred on by the recovery in the automotive sector. Lease rates and sales prices will continue to increase over the next 12 to 24 months, which is great news for landlords in this region. We are seeing a number of companies pursuing build-to-suit options as the existing functional buildings are harder and harder to find. The biggest concern in 2014 could be the lack of available inventory, which will continue to put upward pressure on lease rates and sale prices.”
Macomb County’s industrial vacancy rate fell 40 basis points to 5.8%, showing just over 323,000 square feet of absorption for the quarter and just over 561,000 square feet year to date. User sales were a factor; companies are taking advantage of current prices given property values are on the rise. One of the largest sales was RCO Engineering Corps’ purchase of a 64,000-square-foot facility on Calahan Road in Roseville.
Despite having just over 60,000 square feet of positive absorption, the Southwestern Oakland County’s industrial vacancy rate held steady at 10.4%. Demand for space is gradually picking up. Year to date the submarket posted just over 170,000 square feet of positive absorption.
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