CINCINNATI—A difficult topography has made this city’s North Kentucky submarket a challenging area to launch major industrial projects, but after its vacancy rate plunged to a historic low and the rise of e-commerce made the centrally-located region even more desirable, several top developers recently decided to break ground on a few big distribution buildings. And the local chapter of NAIOP has picked the new fulfillment center in Hebron developed by Dermody Properties and Hillwood Investment Properties for Wayfair Inc., one of the most significant of these new projects, as its Industrial Deal of the Year.

The 898,560 square foot facility, known as LogistiCenterSM at 275, was recently recognized at the organization’s annual Night of the Stars awards, where the chapter honors developers and projects that have made significant impacts on the community. The partners broke ground at the site adjacent to the Cincinnati/Northern Kentucky International Airport in October. Dermody and Hillwood leased the 52-acre site from CVG earlier this year.

David Kelly of Cushman & Wakefield served as Dermody’s broker and Jeff Bender of C&W and Jon Varholak of Transwestern served as the brokers for Wayfair. Paul Hemmer Co. is the general contractor on the project, which it expects to complete in the second quarter of 2016.

“It is one of the largest buildings that the market has seen for quite awhile,” Gregory Arnold, the partner at Reno, NV-based Dermody who helped manage the project, tells GlobeSt.com. Before the recession, most of the largest were between 400,000 and 600,000 square feet. But the demand for e-commerce has made it possible to go big.

The company had been ready to put up two smaller buildings on a speculative basis, a sign of its confidence in Cincinnati in general and this submarket in particular, but Wayfair, an online distributor of home furnishings and décor that already has another Hebron facility, was ready to make a committment to the entire amount of space planned, so the project morphed into one giant structure. 

“There are significant topographical challenges when building projects here,” Arnold adds, including rollings hills and wetlands. He attributes the developers’ success in breaking ground on this project to having a strong local team with deep knowledge of the area.  

This project is not the only big deal to recently hit the KY submarket. A packaging supply occupier signed a 448,098 square foot lease at IDI Gazeley’s newly completed 787,361 square foot facility in Walton. And Monoprice, an e-commerce retailer of affordable electronics and accessories, leased 103,690 square feet at 2055-2095 Global Way in Hebron.

“Industrial vacancy is the lowest it has been in a very long time,” Arnold says, “and if you are a customer that needs a lot of space, there is no vacancy at all.” In the second quarter CBRE reported vacancy rates of 4.4% in Cincinnati and 2% in northern KY. And the rate among class A bulk warehouses in the KY submarket had fallen to just 0.5%.

“There are a few other developers now circling the market looking for sites,” he says.