That's the prognosis from locally based Bullock Mannelly Partners Inc. in its mid-year report. Overall industrial vacancies are at 14.6%, up from 13.9% in 2002. The warehouse category is faring the worst with vacancies of 14.8%.
"Despite increases in vacancy rates, the belief that warehouse markets will lead the upcoming real estate recovery has kept many investors looking for opportunities in this property sector," says Michael A. Crawford, research director at Bullock Mannelly.
The city's industrial market continues "to be negatively impacted by the sluggish economy," Crawford says. "While some economic signs point to greater stability during the second half of the year, the lack of tenant demand will continue to stall a potential recovery in the industrial sector over the balance of 2003."
"As supply and demand fundamentals remain out of line, the overall vacancy rate is anticipated to remain elevated while rents remain on a downward trend," he adds.
The pace of new construction in the area's 480 million-sf industrial real estate market encompassing 5,988 buildings continues to cool, Crawford says. Only 1.5 million sf has been delivered through June of this year compared to 10 million sf in 2002. The warehouse sector dominates new construction with about 1.2 million sf out of the total 1.5 million sf built. Warehouses also represent 67% of the market's total 480 million sf.
Like vacancies, net absorption levels also showed no improvement. A negative 2.3 million sf was recorded at mid-year versus a negative 2.2 million sf posted in all of 2002. Shallow bay facilities fared the worst with a negative 1.4 million sf. Warehouse space posted a negative 796,657 sf; flex properties, a negative 103,049 sf.
On the investment sales side, Crawford sees no great rush to buying, even as prices decline slightly. "Investors will continue to take advantage of opportunities fueled by market weakness and low interest rates," he says.
The warehouse area again dominated the recorded sales. Through mid-year, the average deal sold for $2.3 million, or $29 per sf, "in line with first-quarter figures," Crawford says.
Two notable deals were the 903,000-sf Kellogg Building, off Gunter Road in College Park, which sold for $29.27 million, or $32.42 per sf, and Mrs. Smith's Bakeries Inc. which sold its 314,471-sf distribution center on Horizon Drive in suburban Lawrenceville for $30.5 million, or $96.99 per sf.
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