Northmarq’s Senior Vice President Brad Pepin and Associate Mark Grossman, have completed the sale of a 192,800 sq. ft. industrial property leased to FedEx Ground in Bozeman, Montana. Pepin and Grossman represented the seller who developed the property for FedEx. The buyer was a 1031 exchange buyer based in California.We’re very pleased with the outcome of this transaction, on behalf of our seller,” said Pepin. “Given the credit of the tenant, long lease and high-quality construction, the property was successfully marketed and sold to a qualified tax-motivated buyer, even in the midst of a tumultuous and softening market.”The property was built in 2023 and is situated on approximately 21 acres. The brand-new facility features tilt-wall concrete construction, a TPO roof and ample space for parking, outdoor storage and future expansion.

Senior Vice President Brad Pepin and Senior Associate Jonathan Thompson in Northmarq’s Tulsa commercial investment sales office arranged the sale of a 387,303 sq. ft. distribution facility in Lumberton, North Carolina. The single-tenant industrial asset is 100% leased to Elkay Plumbing Products Company with a guaranty from parent company Zurn Elkay Water Solutions. Northmarq represented the seller, an Atlanta-based developer. The buyer was an individual investor based in California.“As we marketed this newly constructed Class A build-to-suit for our seller, we were thrilled by the market response overall,” said Pepin. “This net leased asset boasts of its quality construction, lease, tenant and location – all contributing to finding the right private investor who met our seller’s objectives.”“The fulfillment of this transaction is another example of how industrial deals are made today. We had a wonderful property, a strong tenant, and market dynamics that allowed our seller to connect with and ultimately transact with a qualified buyer,” added Thompson. “The North Carolina industrial market remains active, with significant activity on both the leasing and investment sides.”Situated on approximately 49.7 acres, the distribution facility is strategically located at the intersection of Interstate 95 and 74 with ample room for expansion. The new build-to-suit facility is Elkay’s second location in Lumberton and roughly three times larger than their current facility. The Lumberton facility is one of Elkay’s mission-critical locations and will allow the company to optimize distribution through its growing business lines. The tenant operates on a corporate guaranteed long-term double net lease. 

Northmarq’s Denver office has announced the addition of Brad Cohen, senior vice president. Cohen is an industry veteran with a successful track record of completing an aggregate sales volume in excess of $2.5 billion.In his new role, Cohen will originate, structure and execute commercial investment sales for institutional, corporate and private owners. Cohen specializes in office, retail and industrial investment sales throughout the Mountain Region.“It thrills me to return to real estate by joining the Northmarq team,” Cohen said. “Combining the company’s superior resources with my consultative approach will lead to excellent results for our clients in these uncertain times.”Cohen began his career in commercial real estate in 2002 when he launched Transwestern’s Mountain Investment Services Group. His team became one of the most formidable in the market and consistently ranked among the top five percent of Transwestern producers nationwide.“We’re thrilled to welcome Brad Cohen to our Denver office, where he’ll focus on commercial investment sales,” said Curtis Hodges, regional managing director based in Northmarq’s Tulsa office. “His track record and industry experience will enhance our capabilities as we grow our commercial investment sales presence in Denver.”Cohen has been recognized as a CoStar Power Broker, the fifth top investment sales team and second top investment/young broker by the Denver Metro Commercial Association of Realtors (DMCAR), as well as the National Rising Star and Rainmaker of the Year by Transwestern. Cohen has a bachelor of business management from the University of Colorado at Boulder.“Brad joins the commercial team in Denver where he’ll work alongside with our debt and equity and multifamily professionals to serve clients and deliver exceptional results,” Curtis added.

BJ Feller, Senior Vice President and Managing Director, and Josh Dicker in Northmarq’s Chicago investment sales office, arranged the $8.65 million sale of a single-tenant industry property fully leased to the Morrell Group, including Stegner Controls as a division of the Morrell Group, a motion controls manufacturer that services dozens of industries including the automotive industry. The 77,100 sq. ft. facility is located at 3333 Bald Mountain Rd in Auburn Hills. Feller and Dicker represented the seller, a Michigan-based developer. The buyer was a private investor based in California. “Although the commercial real estate capital markets are facing headwinds in today’s higher interest rate environment, this transaction is a reminder that great assets still generate tremendous interest and engagement from investors,” said Feller. “Having received five offers in our first few weeks of offering the asset, we ultimately came to terms with an investor seeking to build their Midwest portfolio and prepared to demonstrate their commitment with non-refundable earnest money upon contract execution.” Built in 1998, the property was renovated in 2021 and includes 57,825 sq. ft. of warehouse space and 19,275 sq. ft. of office space. Located in a strong submarket 30 miles north of downtown Detroit, the property benefits from direct access to I-75, a major interstate highway connecting Michigan to Florida. In addition to easy interstate access, the property sits at the outer edge of a large industrial park home to General Motor’s Orion Assembly Plant, a 4.3 million sq. ft. facility. The industrial building is mission-critical to Stegner Controls, Morrell Group’s fastest growing division. Morrell Group is a leading distributor of advanced motion control solutions for industrial and mobile applications. The single-tenant net lease industrial market was not immune to the first quarter 2023 slowdown, according to Northmarq’s Q1 2023 MarketSnapshot. However, the reduced investment activity does not automatically translate to a decrease in investor interest. The sale of Morrell Group’s mission-critical facility represents the persistent popularity of single-tenant industrial assets given their essential role in today’s economy.

Originally published by GlobeSt Cap rates in Q1 2023 represented the highest levels since Q3 2020 for both the single-tenant retail and office sectors, according to a new report from The Boulder Group. Decreasing transaction volume for the greater real estate market continues to limit 1031 exchange buyers transitioning into net lease properties, it said, as cap rates in the single tenant net lease sector increased for the fourth consecutive quarter within all three sectors in Q1 2023. New construction properties with recession-proof tenants including 7-Eleven and McDonald’s represent some of the lowest cap rates in the sector. “However, these tenants are not immune to upward cap rate pressure,” according to the report. “In Q1 2023, cap rates for new construction 7-Eleven and McDonald’s properties increased by 35 and 15 basis points, respectively. Furthermore, the spread between asking and closed cap rate increased for all three asset classes.” The spread rose to 30 basis points for retail, 40 for office, and 27 for industrial, according to the report. “Investors will continue to follow the Federal Reserve’s monetary policy,” The Boulder Group writes. “Investors largely believe there will be an end to the larger rate increases, of 50 basis points or more, in the near term.” Transactions will be driven by low leverage or all cash 1031 buyers for the highest quality product, The Boulder Group said. “However, given the overall uncertainty in the broader real estate market, the depth of the 1031 buyer pool will be limited when compared to historical standards.” Lower-Credit Assets ‘Back Where They Should Be’ Mike Philbin, Northmarq senior vice president, tells GlobeSt.com that “we are closely approaching the one-year mark of when we started to see the peak of the net lease investment market fizzle away. “Due to the repeated interest rates hikes, this was inevitable. However, not all net assets had as drastic of CAP rate shifts. The higher-credit, investment-grade tenants have had a maximum of 50 bps upward movement in this time. “The lower credit, smaller franchisee, in tertiary market tenants have seen closer to 150-200 bps. We did have a very frothy net lease investment market moving into Spring 2022. But relatively speaking, the lower credit assets are back where they should be and the investment grade net lease assets are back to the 2018-2019 range, which was a strong market.” Price Maximization Especially Difficult for Larger Transactions Alex Sharrin, senior managing director, JLL, tells GlobeSt.com that investment momentum persists for performing retail that can be acquired with positive leverage. “The net lease market sits at the crux of real estate and credit, but intrinsic fundamentals are trumping credit amidst volatility,” he said. “Private capital continues to lead the bidder pool for NNN assets across the country and is often winning deals due to the unleveraged nature of the capital/underwriting. “Capitulation has been faster than expected for liquidity and re-investment.” Sharrin said price maximization has been especially difficult for larger transactions (i.e. $75MM+). “Instead of making comparisons to early 2022, a more realistic pricing benchmark is 2018/2019 levels or, pre-pandemic and pre-stimulus,” he said. Transaction Volume Will Soon ‘Level Off’ Ryan Butler, managing director and senior vice president, Northmarq, tells GlobeSt.com that investors across all commercial real estate asset classes have been paying close attention to the responsive actions of the Federal Reserve and US Treasury as they work to address the ongoing regional banking crisis and continue the fight to tame record-high inflation. “As a result of the swift actions taken by both bodies, we are starting to experience a broad expansion in capitalization rates across the Net Lease sector,” Butler said. “However, it is important to note that this cap rate expansion cannot be painted with a broad-brush stroke. Investors in our space are still seeking well-positioned industrial and retail assets leased to ‘recession-proof’ tenants and, as a result, still transacting. “We anticipate a leveling off in the downward trend in transaction volume through the end of the year as investors make sense of this changing market. Realizing that the net lease asset class will continue to be a safe and stable investment vehicle within the real estate sector.” Bid-Ask Gap Widening Eli Randel, COO, CREXi, tells GlobeSt.com that cap rates on closed net lease assets have risen almost 5% YoY with transaction velocity slowing as buyer demand has cooled because of macro-market conditions. “The segment a year ago was at parity between asking and closed prices whereas now sales are transacting below asking prices illustrating a widening of the bid-ask gap,” Randel said. With increases in interest rates, both costs of capital have increased, and similar alternative vehicles are now generating attractive yields (for instance a liquid “risk-free” savings account at Marcus has a 3.75% interest rate), Randel pointed out. “Yet, net-lease real estate still has many benefits to passive investors and remains historically active and strong. Net lease continues to attract 1031 buyers and real estate investors looking for good yields with future upside and often buying in cash. “While slightly less active, higher-yielding, and with more discriminatory underwriting of terms (largely term-length and credit), net lease remains an important category and a great investment product for many in today’s environment.” Stale Assets on the Market, Decreasing Inventories Geoffrey West, senior vice president, MDL Group/CORFAC International, tells GlobeSt.com that amid the historic pace of interest rate increases experienced over the past year, single tenant net lease sellers have been reticent to quickly meet the increased cap rate market expectations resulting in decreased transaction volumes, stale assets on market, and decreasing inventories of available product. West said specifically in the California, Arizona, and Nevada markets, multiple surveys of available fast-food STNL assets (excluding ground leases) conducted over the past year in conjunction with maintaining market positioning of existing listings indicate an overall increase in average asking cap rates from April 2022 to April 2023 from 4.1% to 4.7% and a significant decrease in the quantity and quality composition of the available assets. And within that survey, secondary and tertiary market locations in those states appear to be adjusting to a higher cap rate environment more quickly while primary and core market locations lag as they seek to maintain historical premium cap rate levels. “The recent restabilization of the US 10-year treasury rates around the 350bps level appear to have put reduced upward pressure on asking cap rates as surveys conducted in February 2023 and April 2023 only reflected a 10bps increase in asking cap rate,” West said. “While prospective buyers with 1031 Exchange motivations cannot acquire treasury note assets and those don’t enjoy the benefits and burdens of real estate ownership, the yields being offered in those financial instruments, especially short-term yields, are often superior to core location yields being sought by sellers.” West added that, as such, investors without 1031 Exchange motivations and flexibility may look to temporarily park monies in these alternative investments and benefit from the premium yields being offered by the inverted yield curve until Seller expectations and the current bid-ask spread tighten and transaction activity levels rebound. © 2022 ALM Global Properties, LLC. All rights reserved.

Originally published by GlobeSt Investors seeking higher cap rates are finding them in industrial spaces that serve manufacturing, according to a new report from CBRE. Although e-commerce-fueled bulk logistics space is the darling of the current cycle, manufacturing stimulates industrial space demand for both factories and warehouses. CBRE pointed to Austin, Phoenix, and Reno as areas that benefit from new factories and capital stock capable of building high-value goods. “Interestingly, high-cost California has expanded its manufacturing as it retains a competitive edge in producing aerospace, chemicals, computing equipment, and other extremely high-value goods,” according to its report. Los Angeles is a notable outlier, it said, reflecting its heavy exposure to lower-value sectors, such as garment making. The Midwest accounts for just over one-third of U.S. manufacturing employment, just ahead of the South. Manufacturing Tenants More Imbedded in the Property Rob Gemerchak, vice president, investment sales, Northmarq, tells GlobeSt.com that net-leased industrial manufacturing properties remain a very popular asset class among experienced investors – particularly those whose underwriting considers the tenant’s use of the facility, their industry, the property’s infrastructure, and regional labor. “As opposed to some other asset classes, manufacturing tenants tend to be more embedded in the property due to their investment in process machinery and equipment, production lines, and use of a trained workforce,” Gemerchak said. “A successful manufacturing tenant is often more likely to renew a lease vs. relocate – due to the time, expense, and production challenges involved in a relocation.” Considering manufacturing facilities’ unique infrastructure that may include cranes, heavy power, reinforced floors, etc. – there is economic value in these systems which support and enhance the real estate investment, he said. “The tenant’s industry is also a factor that investors consider, as firms who are supplying growth industries such as computer and electronics, chemicals, pharmaceuticals, and automotive provide the strongest security,” according to Gemerchak. “Finally, the regional workforce that supplies the tenant’s operation is an important variable that investors consider. As onshoring and reshoring of the manufacturing base continue, industrial properties located in strong regional labor markets will continue to be considered very attractive as a long-term investment.” Economic Turbulence Might Have Inflated Cap Rates Shanti Ryle, CREXi senior content marketing manager, tells GlobeSt.com that overall, while the total sales comps for manufacturing buildings are trending down year-over-year (given overall pauses in activity due to rising interest rate/economic factors), valuations and transaction volume for manufacturing industrial properties are still on the rise. “There may be some pause in transaction velocity following pandemic-era construction delays and economic turbulence, and the delivery of multiple properties at the same time may have inflated cap rates, lowering total sales value in 2022,” Ryle said. Arizona, Texas, I-85 Corridor Ideal for Manufacturing Expansion Adrian Ponsen, national director of U.S. industrial analytics at CoStar Group, tells GlobeSt.com that labor shortages have been gripping most sectors of the U.S. economy since 2019, but because of an aging workforce, and a prevailing skills gap, manufacturing is one of the industries struggling most to grow and retain its headcount. “As a result, US regions doing best to attract both foreign and domestic in-migration including Arizona, Texas, and the I-85 corridor stretching through Georgia and the Carolinas, have had a huge leg up securing the largest manufacturing expansions in recent years, particularly those tied to electric vehicle and semiconductor assembly,” Ponsen said. “These are the locations where manufacturers feel most confident that local labor force growth will be strong enough to support staffing up new operations at scale.” © 2022 ALM Global Properties, LLC. All rights reserved.

Robert Poirier, associate vice president in Northmarq’s Atlanta office, arranged the $9.5 million sale leaseback of a single-tenant industrial property fully leased to Mount Vernon Mills, Inc. The 270, 252 sq. ft. facility is located at 235 River Road in Rockingham, North Carolina. Northmarq represented both the buyer and seller. The buyer was an institutional investor based in Arizona.  “Despite the current market, we were able to create a tremendous amount of interest from a very diverse group of investors, ultimately receiving 18 LOIs during the marketing process,” said Poirier. “At the end of the day, surety of close, and the strong reputation of the investor is what won the deal. Built in 1973, the property is situated on 27.74 acres and serves as a mission-critical facility for Mount Vernon Mills, the country’s largest apparel fabric manufacturer. Mount Vernon Mills’ Rockingham location produces open-end spun yarn and woven greige goods for the company’s flame-resistant products. Offering ample room for expansion, the industrial facility is strategically located right off US Route 220 and less than two miles from US Route 1 and Interstate 74. The tenant operates on a corporate guaranteed absolute triple net lease.

Daniel Herrold, senior vice president of Northmarq’s Tulsa office, recently spoke with Wealth Management Magazine in a story focusing on how opportunities for investors looking for off-market acquisitions have opened up as sellers become more concerned about marketing a property that fails to sell. “Off-market deals have always been highly sought after because investors believe that opportunities that haven’t been widely distributed and/or marketed offer more attractive pricing,” he said. Herrold went on to note that that owners willing to sell their assets at a time when values are declining usually have a motivation to sell, such as personal financial need or an upcoming loan maturity, so they are looking for a qualified buyer who can offer speed of execution and transaction certainty. Other topics covered include: Federal Reserve’s impact on off-market deliveries Flexibility of 1031 exchange Remaining Challenges

Originally published by GlobeSt It seems that inflation and a slowdown in the capital markets may have finally caught up with the single-tenant net lease sector, which has posted its fourth consecutive quarter of declining activity, according to an analysis from Northmarq.  In Q4, the single-tenant net lease market saw approximately $14.9 billion in sales, down nearly 16% quarter over quarter and down 66% year-over-year. The overall average cap rate also increased for the first time in three years. However, annually, the industrial market had its second strongest year ever with more than $40 billion in sales, while office and retail posted numbers in line with average volume years.  “The fourth quarter comparison is perhaps overly dramatic due to last year’s record-setting final quarter, but looking forward, it’s likely that we’ll continue to see lower levels of sales volume in the coming quarters rather than a return to near-record highs,” says Lanie Beck, Northmarq Senior Director, Content & Marketing Research. “There is currently enough uncertainty in the market that some investors may choose to observe from the sidelines, taking a more cautious approach. Alternatively, as pricing trends shake out, investors seeking higher yields may find new opportunities.”  Noting that it’s unlikely that investment activity in the sector will stop entirely, Beck also says “the market should be prepared to see conservative activity levels in at least the first half of 2023.”  “Past the mid-year point, demand will be influenced by economic conditions – especially if we enter a recession – interest rate levels, supply/demand dynamics, and the willingness of sellers to correctly price new-to-market assets,” she says. “An imbalance with any one of these influences could impact overall demand levels for 2023 and beyond.”  Multi-tenant retail has also seen a pullback, despite having previously been on pace in 2022 to hit a historic high. Fourth quarter activity slowed so much that the year ended as the fourth strongest ever as multi-tenant retail cap rates jumped by 10 basis points in Q4 and now sit at 6.78 percent.  “This is the highest average cap rate reported in a year, and while it’s likely the start of additional upward movement, cap rate increases are not expected to be dramatic in the next few quarters,” Beck says.  © 2022 ALM Global Properties, LLC. All rights reserved. 

Market data, charts & graphs: current and historical trends for single-tenant office, industrial and retail properties, as well as multi-tenant retail Overall market trends Market summary & analysis Economic data points The overall single-tenant net lease market posted its third strongest year in history, with approximately $77.6 billion in sales volume. A strong start to the year, as 2021’s momentum carried over to first quarter 2022, allowed the market to perform as well as it did annually, but recent quarterly activity tells a different story. Influencing factors, like inflation and rising interest rates, have seemingly caught up with investors and sales volume has slowed considerably. In fact, the single-tenant net lease market has now reported four consecutive quarters of declining activity and quarterly totals are down 66 percent year-over-year. The fourth quarter comparison is perhaps overly dramatic due to last year’s record-setting final quarter, but looking forward, it’s likely that we’ll continue to see lower levels of sales volume in the coming quarters rather than a return to near-record highs. There is currently enough uncertainty in the market that some investors may choose to observe from the sidelines, taking a more cautious approach. Alternatively, as pricing trends shake out, investors seeking higher yields may find new opportunities. There is no expectation that investment activity across the single-tenant net lease market will grind to a halt, but the market should be prepared to see conservative activity levels in at least the first half of 2023. Past the mid-year point, demand will be influenced by economic conditions – especially if we enter a recession – interest rate levels, supply/demand dynamics, and the willingness of sellers to correctly price new-to-market assets. An imbalance with any one of these influences could impact overall demand levels for 2023 and beyond.   The multi-tenant retail sector has also witnessed a reduction in activity levels, particularly during the second half of 2022. After a strong fourth quarter 2021, and a second quarter 2022 that was recorded as the third strongest period in history, the sector began seeing a pullback in transaction volume that mirrored the rest of the market. In fact, despite being on pace to have a record-setting year, fourth quarter activity slowed so significantly that we ended 2022 as only the fourth strongest year in history, instead of potentially the first. Multi-tenant retail cap rates jumped by 10 basis points in the final quarter of the year, sitting now at 6.78 percent. This is the highest average cap rate reported in a year, and while it’s likely the start of additional upward movement, cap rate increases are not expected to be dramatic in the next few quarters.    

Originally published by GlobeSt Logistics and parcel delivery remains No. 1 in million square feet requirements for industrial space but other industries have been making traction, according to a new report from JLL.  The report showed that the automotive industry has seen its demand increase by more than 156% since 2021 to serve an influx of electric vehicle and battery manufacturing endeavors across the country.  And demand for construction, machinery and materials companies grew by more than 41% this year because of the oversized pipeline of commercial and residential demand for housing.  JLL added that with companies reevaluating their existing operations and addressing the COVID-induced supply chain disruptions, demand will continue to increase for manufacturing and automotive users.  From a macro perspective, supply chain woes continue to create backlogs at the ports. The concept and practice of reshoring have come into play, and many occupiers have placed this at the forefront of their business operations.  Tight availability, high rents, and port congestion along the West Coast have pushed many occupiers to the Southeast region and to ports along the East Coast, such as Savannah and Charleston, which are seeing record TEU volumes.”  Industrial Outperforming Other Sectors  Meanwhile, investor interest in industrial continues to flourish. Northmarq’s Jeff Tracy, senior vice president, Tulsa, tells GlobeSt.com that while there has “obviously” been an impact on cap rates, “we continue to see the broad industrial sector perform well in relation to the other sectors.  “From an industry perspective, logistics and general light manufacturing continue to garner the most interest from buyers,” Tracy said. “Additionally, outdoor storage and assets that require quality outdoor yard space for operations are also popular amongst buyers at this point and seem to achieve the most aggressive pricing compared to other asset classes and sectors.”  Tracy added that the Midwest and Southeast are performing the best in relation to other locations around the country.  Robust Online Retail Sales Boosts Logistics Demand  Northmarq’s Rob Gemerchak, vice president, Toledo, tells GlobeSt.com that despite the challenges in the economy, there continues to be strong user demand across a range of industrial sectors, including logistics, technology, and manufacturing.  “Logistics demand is the strongest and is being driven by robust online retail sales and a national focus on supply chain efficiencies,” Gemerchak said.  “While the largest industrial markets such as Chicago, Dallas, Atlanta, New York, and Los Angeles continue to grow and thrive, there has also been tremendous growth in several notable markets such as Indianapolis, Kansas City, Phoenix, and Columbus.  “Looking towards the future, we expect that industrial demand and development will follow population growth in regions such as the Southeast and Southwest, as companies seek to locate near consumers and with strategic access to a growing employment base.”  Charleston, Savannah, Jacksonville E-Commerce Magnets  Avery Dorr, vice president at Stonemont Financial Group in Atlanta, tells GlobeSt.com that he’s seeing “a significant bump” in demand in port markets across the country, with the East Coast outpacing the West in recent years.  “The practice of reshoring is more important as supply chain woes continue to create backlogs at the ports,” according to the JLL report. “Tight availability, high rents, and port congestion along the West Coast have pushed many occupiers to the Southeast region.”  This year the Southeast region was the top market in terms of demand, accounting for 240 msf in requirements.  Dorr said that Charleston, Savannah, and Jacksonville have been magnets for e-commerce users and third-party logistics providers, and Stonemont continues to source out new speculative development opportunities in those markets.  “Florida and Texas have been at the top of our radar due to the tremendous population growth, deep labor pools, and overall business-friendly climates in both states,” Dorr said. “Investor appetite in these areas is particularly strong and we anticipate activity will remain healthy there in 2023 despite recent economic headwinds.”  High-Barrier, Major Urban Markets Should Thrive  Ryan Nelson, Managing Principal of Turnbridge Equities, tells GlobeSt.com that high-barrier-to-enter, major urban markets will see the greatest industrial growth in 2023.  “Businesses are striving to be as close as possible to the end user, and this has made urban markets with high population densities and land constraints a hotspot for last mile logistics,” Nelson said.  “Recently, Turnbridge topped out Bronx Logistics Center, the largest industrial development in the NY Metro Area, set to be complete in Q3 of 2023, which is one of a very limited number of new industrial projects that will be delivered in the market, given land scarcity, construction costs, and debt capital markets dislocation.”  Nelson said projects that will be delivered in 2023 will have been financed in the last cycle with the majority delivering pre-leased.  “New development starting in 2023 and delivering in 2024 or later will largely be limited to build to suit, as spec construction will be constrained by capital market dislocation,” he said.  3D Printing Shrinking Commercial Space Requirements  BKM Capital Partners’ CEO Brian Malliet, tells GlobeSt.com, “The small-bay, light industrial landscape has been transformed over the last decade and a half as tenant demand shifted towards dynamic growth industries such as e-commerce, technology & innovation, and advanced manufacturing.  “E-commerce demand has reshaped the supply chain, which has driven demand for industrial product to new levels,” Malliet said. “As consumers demand faster delivery times, retailers require well-located and highly functional light industrial warehouses to reduce transportation costs and meet customer needs.”  He said that new technologies are driving further use of chip capabilities, such as autonomous vehicles and robotics, that now utilize light industrial spaces for their operations since many of these spaces offer flexible zoning for multiple uses, including office, assembly, warehousing, and manufacturing.  Companies capitalizing on advanced manufacturing and 3D printing are also migrating toward smaller facilities, according to Malliet, with 3D printing allowing businesses to accomplish operations in just 10,000 square feet that would previously have needed five times the space.  Desire to Produce Goods Closer to Customers  HSA Commercial Real Estate recently broke ground on four speculative industrial warehouses totaling 1.9 million square feet along the Interstate 94 corridor between the Chicago and Milwaukee metros.  “We’re bullish on adding modern warehouse space along major logistics arteries,” Robert Smietana, vice chairman and CEO of HSA Commercial Real Estate, tells GlobeSt.com.  “Robust tenant demand for this space ranges from traditional retailers and e-commerce companies to third-party logistics firms, to manufacturers that are reshoring all or a portion of their operations. Across industries, there’s a desire to produce and store goods closer to customers as a means of mitigating future supply chain disruption.”  Logistics Firms Lessening Negative Impact of E-Commerce’s Pullback  Pedro Nino, vice president, head of Industrial Research and Strategy, Clarion Partners, tells GlobeSt.com that after some demand pulled forward in 2021, pushing net absorption to the highest levels on record, US industrial net absorption began normalizing in 2022.  “Despite some deceleration from e-commerce users, which accounted for most of the recent surge in” absorption, the industrial market still recorded its second-highest total for overall annual net absorption in 2022,” Nino said.  “This highlights the pent-up demand in the market as record low vacancies, limited supply, and an ultra-competitive leasing environment previously left some unfulfilled requirements on the sidelines.”  A combination of Clarion’s portfolio data, which includes more than 215 million sf and nearly 1,000 industrial properties across the US, as well as data from leading brokerage shops, show that third-party logistics firms and general retailers have sufficiently lessened the negative impact of an e-commerce leasing pullback.  “This makes sense as traditional retailers continue building out their modern/e-commerce distribution strategy, all while 3PLs offer comprehensive solutions, and ultimately, flexibility, in all things related to transportation and order fulfillment,” Nino said.  ‘Even a Recession’ Won’t Stall E-Commerce Demand  Contrarily, CommercialEdge said that e-commerce growth will continue to drive high levels of demand in the industrial sector for the foreseeable future, but it will not reach 2020 levels again.  “New supply has yet to match demand, and even a potential recession is unlikely to cause e-commerce sales volume to fall.”  CommercialEdge said that in-place rents have grown the most in the Inland Empire (13.1%), Los Angeles (10.7%), and New Jersey (8.9%). The lowest rates of rent growth were found in Tampa (2.5%), St. Louis (2.6%), Memphis, and Houston (both 2.8%).  The national vacancy rate measured 3.8% in November, falling 20 basis points from October. Despite record levels of new supply delivered in 2022, the vacancy rate fell throughout the year.  In-demand markets in the inner portion of the country also have low vacancy rates, including Nashville (1.2%), Columbus (1.7%), Indianapolis (2.5), Kansas City (2.5%) and Phoenix (2.9%). The abundance of space available on the outskirts of these markets for new development keeps rent growth lower than what is being seen in most port markets.  When Amazon Slowed Its Network, Others Stepped Up  Adrian Ponsen, Director of U.S. Industrial Market Analytics, CoStar, tells GlobeSt.com that as supply chain bottlenecks eased in 2022, imports into the U.S. surged to record highs.  To help process this increased flow of goods, “third-party logistics companies stepped up and increased their overall leasing in 2022 relative to 2021, helping to compensate for the fact that Amazon slowed its distribution network expansion,” Ponsen said.  He said that building material and gardening supply retailers like Home Depot and Lowe’s, which are some of the largest U.S. industrial tenants, also accelerated their leasing in 2022, mainly to increase the speed and scale of their home delivery offerings.  Additionally, industrial leasing by retailers like Dollar General, Rite Aid, and Target also accelerated in 2022, as these companies sell day-to-day necessities that have remained in high demand even as households feel the pinch of inflation.  © 2022 ALM Global Properties, LLC. All rights reserved. 

Northmarq’s Brad Pepin, senior vice president, and Mark Grossman, associate, have completed the sale of a 196,541-square-foot industrial property leased to FedEx Ground in the Pacific Northwest. The buyer was a private investor based in California and was represented by Northmarq’s Colin Couch.   “We’re very pleased with the outcome of this transaction, on behalf of our seller. The market continues to show great interest in quality net lease industrial build-to-suits like this one.” said Pepin.   The property was built in 2022 and is situated on approximately 30 acres. The brand-new facility features tilt-wall concrete construction, Class-A improvements, and ample room for parking.