The vacancy rate hit 20.4% at the end of March, up from 19.3% at the end of 2001 and 17% at the end of March 2001. Kim Gatley, REOC's research director, said the increase comes from a combination of greater cautiousness by companies in their facilities planning and the continued construction of speculative space.
In the first quarter, 219,000 sf was added to the market. That comes on the heels of 622,000 sf of new speculative construction in 2001. Two projects completed in the first quarter were 120,200 sf of warehouse space at Alamo Downs Distribution II and 71,198 sf of flex space at Tech Ridge at University Park.
The overall market had a positive absorption of 21,400 sf in the first quarter with gross leasing activity of 351,000 sf, according to the report.
In the distribution/warehouse market, vacancy rose to 18.1% in the first quarter, up from 17% a year ago. More than 92,000 sf was absorbed mainly because of activity at Alamo Downs, which has 34,000 sf pre-leased and 132,000 sf of absorption at KellyUSA.
The warehouse/distribution average rent was $3.98 per sf, up just six cents over March 2001. The service center/flex market had negative absorption of 71,000 sf for the first quarter pushing the vacancy rate to 25.7% from 15.5% a year ago. The average asking rental rate, however, rose $1.16 per sf over the past year to $8.61 per sf.
More space is coming to the market in warehouse/distribution and service center/flex. Buildings 3 and 4 in the Green Mountain Business Park, now under construction, will add 111,671 sf in warehouse space. As for service center/flex, Tech Center I at the Crosswinds will bring 104,000 sf in the northeast submarket and University Heights Tech Center I and II will add 132,000 sf in the northwest submarket.
REOC anticipates the market to stabilize in the coming months as the national and local economies improve. "In fact, many brokers are already reporting that leasing activity has increased since the close of the first quarter," said John Turcotte, REOC's partner and director of industrial leasing.
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