CINCINNATI—The steady recovery of the US economy and the simultaneous expansion of e-commerce has sent the vacancy rate for this region's industrial properties plunging to a historic low. And despite that record-low vacancy, positive absorption has been significant so far in 2015, and shows no sign of slowing down in the third or fourth quarters of the year, according to a new mid-year market study by DTZ.

“This is the lowest vacancy rate that we've seen, at least within the past ten years,” Skylar Stein, an associate in DTZ's Cincinnati office, tells GlobeSt.com. In the first quarter, vacancy sank to just 4.63%, but in the second it went even lower and eventually hit 4.37%. And the importance of distribution buildings to the metro area is illustrated by the fact that the rate for class A bulk warehouses now stands at just 1.3%.

“Net absorption was positive in the Cincinnati market for the 16th consecutive quarter, reaching 1.25 million square feet in the second quarter,” according to the DTZ study. Net absorption for the year now stands at 3.65 million square feet and “at this pace, 2015 figures will easily exceed the 4.8 million square feet of positive absorption seen in all of 2014.”

“The only thing we're not seeing is blockbuster deals,” Stein adds, partly because until developers complete new deliveries, there is not enough vacant space to accommodate big users. Big leases were relatively common in the preceding few quarters, but only three leases of more than 100,000 square feet occurred in the second. The largest was a 282,466 square foot renewal and expansion of Humana at Park 75 @ Union Centre II in north suburban West Chester. However, the market is still seeing a plethora of smaller deals. “That's why the needle keeps moving down.”

Cincinnati has a reputation as a conservative city, Stein says, and developers had refrained from launching many new projects even as the vacancy rate kept dropping. But in the second quarter, 430,400 square feet of new construction was delivered to the market, DTZ found, and developers have 2.91 million square feet of industrial space currently under construction across the region. Four speculative bulk warehouses make up the majority of the construction. Three will be delivered later this summer, and developers recently broke ground on the fourth, a 520,000 square foot Prologis Gateway International warehouse in Hebron, KY.

“It's hard for developers to not feel confident these days,” Stein says, especially when it comes to certain submarkets in the region. The suburbs of Northern Kentucky, for example, have an overall vacancy rate of only 1.9% and the rate among class A bulk warehouses in the submarket has fallen to 0.5%. “We're one or two deals away from not having any space. Developers are not scared to take a chance when things are this tight.”