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Momentum in the North Metro Industrial Market
<br />Tenants beware -Landlord's market ahead
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<br />In the summer of 2000, the U.S. manufacturing
<br />industry and industrial real estate market went into a
<br />tailspin. Over the course of the next three years, the
<br />manufacturing sector lost three million jobs, and the
<br />trade def tit continued to increase. Some jobs were
<br />lost to foreign countries like China, Taiwan, India,
<br />Mexico, and other developing nations that offered
<br />cheap labor and long-term operating cost savings.
<br />Many jobs were lost simply because factories were
<br />closing the doors. The impact was felt in many ways
<br />here in the U.S.-from higher unemployment rates to
<br />lower prices for consumer products to a glut of empty
<br />manufacturing space that left vacancy races rising.
<br />After several years of increasing vacancy races and
<br />virtually no new construction, the industrial market
<br />is f pally gaining momentum. In 2004, the vacancy rate
<br />began to decrease, and companies started to expand
<br />again. As a result of that expansion, companies needed
<br />affordable space fast. In the northwest metro alone
<br />in [he past 24 months, there have been numerous
<br />transactions that have absorbed more than two
<br />million square feet of industrial space. Archway, Boston
<br />$cientif c, Dane Industries, Data Recognition, Modern
<br />Machine, Nparallel, Nonin Medical, Room and Board,
<br />Stein Industries, Thorpe Distributing, and Zomax are
<br />all examples of companies that have expanded to more
<br />than 50,000 square feet or who have built new.
<br />available two years ago. Now there is a need for new
<br />product, so, for the first time in four years, speculative
<br />construction is underway. The construction boom in
<br />Asia, and higher fuel, petroleum, concrete and steel
<br />prices continue to push the cos[ of construction
<br />higher here at home, forcing developers to increase
<br />nee rental rates. As construction costs continue to
<br />rise, vacancy rates continue to fall, and companies
<br />continue to absorb large blocks of space, rental rates
<br />will continue to increase.
<br />What's the bottom line? Existing quality, affordable
<br />industrial space will be absorbed first in the coming
<br />year. Tenants will be left with cheaper, less functional
<br />facilities or newer, more expensive buildings to choose
<br />from. If you're a tenant, the time to strike a deal is now.
<br />If you're a developer, star[ building.
<br />It s all a matter of supply and demand; cause and
<br />effect. In recent years, new construction was non-
<br />existent because vacancy rates were high (more than
<br />20 percent)-there simply wasn't a need for new
<br />construction. However; with the absorption race
<br />rising fast, existing quality space is becoming scarce,
<br />and companies no longer have [he options [hat were
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