GlobeSt.com EXCLUSIVE: 1M SF Brewing in Airport Submarket

Three developments are nudging 100% occupancy, speeding one developer with land to spare toward a ground-breaking on 140,000 sf or the sixth building in the 66-acre Northfield Distribution Center, owned by San Francisco-based AMB Property Corp. The momentum is such that Atlanta's IDI has ended a two-year hiatus from building to tackle a 292,800-sf spec project in its 180-acre DFW Trade Center. Granite Properties too is poised, with 43.8 acres on the north side and another 25 acres on the south side.

Inside the 18,000-acre airport's northern bounds, the story is much the same. Trammell Crow Co. is in the final design stage for a 616,000-sf warehouse in the 500-acre International Commerce Park, part of the 2,500-acre Foreign Trade Zone 39. Hillwood has latched onto a build-to-suit in the 300,000-sf range for Network Distribution Inc., selecting a tract with rail access in the duty-free zone.

The planned starts nearly quadruple the 228,250 sf that was under construction at the second quarter close when vacancy stood at 13.9% and net absorption was 435,476 sf in the 48.1-million-sf submarket, according to Grubb & Ellis Co.'s local researchers.

But, it's the leasing activity of late and 440,000 sf filled in five buildings that has AMB's developer Seefried Properties Inc. of Atlanta ready to bring in construction crews. "I know of about 400,000 sf of done deals, either new buildings or interior build-outs, that have been done and aren't being announced," Rick Medinis, executive vice president for locally based Robert Lynn Co., tells GlobeSt.com. Of those "under-the-radar" deals, Danzas AEI Inc., based in Iceland, recently inked a 220,000-sf lease for International Airport Centre along Westport Parkway.

Medinis, who holds the AMB assignment along with Robert Lynn Co.'s Chris Jackson, isn't talking about potential tenants or pending proposals for the Northfield addition, but is confident he will be holding the building's first contract before the February 2004 delivery. And, he stresses, it's not Coasters, one of the most talked about deals of the summer as executives go hot and then cold over a leasing proposal now rumored to have three names on the short list.

Unlike AMB with land to spare, JA Green Development Corp., based in nearby Grapevine, has two buildings filled in the 350,000-sf JAG Trade Park West and is quickly locking in the third one while Atlanta-headquartered Oakmont Industrial Group is 97% filled in its two-building, 458,980-sf International Airport Centre. Both projects are pushing 100% occupancy within 18 months of their deliveries.

"The big driver continues to be the airport and over the long term it will continue to create demand," says A. Richard Rider Jr., Oakmont's president, whose 25.4 acres are now built out.

As private developers apply pressure to the northern boundary, the airport board is actively chasing industrial development deals for its land. Last year, infrastructure was put in place on 150 acres while this year is bringing rough grading and utilities to 250 acres, carved into 12- to 20-acre parcels that will be leased for 40-year terms. Tracy Thompson, vice president of airport real estate, tells GlobeSt.com that lease rates, on the average, are calculated on the building's fair market value appraisal plus 10% for the first year's rent and stair-stepped until the 20th year when a re-appraisal is due.

Thompson says three leases, two signed this year, reflect the wisdom of hawking ground leases to private developers for spec or build-to-suits now that airport neighbors are practically sold out. "We're not here to flood the market or undercut the market," she stresses, noting "resistance" has been nil from the private sector. "We do have a very different product in that we don't sell our product." Like the private developers, Thompson too says there will be more deals--one, maybe two--that will be ready for airport board approval before the year ends.