Sperry Van Ness International Corporation’s (SVNIC) 2015 Market Update Reports assess the current state of the national commercial real estate market, and identify micro-trends within specific geographic regions and industries for 2015. Today we are delving into the 2015 Top Industrial Markets to Watch. Not the largest or the most actively contested markets, the 2015 Industrial Markets to Watch are each at an important juncture that presents unique opportunities for investment. Together, they reflect the diversity of trends that is driving the economy and commercial real estate performance in markets across the country.
Top Industrial Market to Watch: Indianapolis, IN
The industrial fundamentals for the Indianapolis market remain relatively strong despite the delivery of more than 5.5 million square feet in 2014. Those new properties helped drive Indianapolis to the top-tier of markets for rent growth. Bucking the national trend, however, the vacancy rate for the metro area jumped at the same time from a historically low 7% in the first quarter of 2014 to nearly 8% in the first quarter of 2015. Amongst the additions to the industrial landscape in 2014, online computer parts retailer NewEgg opened up a state-of-the-art fulfillment center that will service the Midwest region, processing up to an estimated 12,000 orders per day. Other large deliveries included a 1.1 million square foot distribution facility for Johnson & Johnson and a 545,000 square foot regional distribution facility for Omaha, Nebraska-based retailer Gordmans. While there are millions of square feet still under development, most of that product is build-to-suit, including a 1.2 million square foot distribution facility for Walmart and a 600,000 distribution facility for mattress manufacturer Tempur Sealy.
Occupancy rates are expected to recover some of their lost ground in late 2015 and 2016. Until those expectations are reflected in prices, investors in search of good values will find cap rates in the range of 7%, higher than in other markets with similar rent growth records in 2014.
To read more on Indianapolis and other top industrial markets, download the full version of the 2015 Industrial Market Update report here.
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