Cleveland Industrial Keeps Booming
The market has not seen significant positive absorption for about a year, but vacancy remains at a historic low.
CLEVELAND—Industrial markets across the US are thriving, and the Cleveland metro area is no exception. The market has not seen significant positive absorption for about a year, but the first-quarter vacancy rate was not affected, according to a new report from Newmark Knight Frank. In fact, it remains at a historic low of 5.8%.
One explanation is that the overall inventory has shrunk. One year ago, it stood at 291 million square feet, but by this year’s first quarter that number was 284 million square feet. And according to NKF, the market has “far more demand than space available.”
In the last two years alone, the vacancy rate has declined 110 bps from 6.9% in the first quarter of 2016. That decrease came despite developers delivering nearly 1.3 million square feet of new product, 135,000 square feet of which came online this past quarter. And builders currently have nearly two million square feet of new space underway.
The steady vacancy rate has also helped push up average rental rates. It now stands at $4.34, according to NKF, or $0.28 higher than it was two years ago. The main factor pushing the market’s rents higher, however, has been “the growth of e-commerce” and “new and prospective product.”
“Land and construction costs have both gone up, and companies continue to seek out properties with 32’ to 37’ clear ceiling heights,” NKF says. But it’s not just the best new product that drives demand. “There are many older buildings that have not been slated for repurposing because legacy manufacturers are using them and are comfortable with the features they offer.”