CHICAGO—Transaction volumes for industrial properties in the US totaled just over $17 billion in the first half of the year, a boost of 10% from the first half of 2012, according to data recently published by Real Capital Analytics. The Midwest region, however, performed especially well, with $2.87 billion in transactions, a 30% increase over last year. Only the Northeast, with a 32% increase, had a better first half. The West and Southeast regions suffered with volume declines of 1% and 7%, respectively.
Overall, RCA says “there is little evidence that the hike in interest rates that started in May has yet to have a significant impact on either volume or prices.” The volume in June did decline slightly, but “it is tough to ascribe this to the rise in interest rates.”
But the news is not all good for Midwest investors. Prices have been dragged down by the high level of unresolved distress in Midwest properties. Nationwide, just over $11 billion of the total $27.8 billion of distress remains, or about 40%, but in the Midwest $2.2 billion remains, or about 55%. The drag on Midwest prices has been significant, with a 12% decline in RCA's Commercial Property Price Indices from the first half of 2012. By contrast, prices in the West and Northeast regions increased 7% and 3%, respectively.
Although many Midwestern cities saw huge jumps in transaction volumes, perhaps the most important factor in the overall regional increase was what happened in the tertiary markets. The total volume in Midwest warehouse transactions in the first half of 2013, not including flex properties, was just over $2.1 billion, an increase of 24% over last year. But the tertiary markets, with a total of $725 million, saw an increase of 135%. For example, the largest industrial transaction in the region was the purchase of the 1.4-million-square-foot Domtar Paper Mill in Port Edwards, WI, by Ohio-based DMI Acquisitions LLC for $68.7 million. The mill was shut in 2008, but DMI plans to reopen the facility
Chicago, by contrast, had $688 million in such transactions, a decrease of 2%. Kansas City, Cleveland and St. Louis, each with warehouse transactions totaling less than $100 million, saw increases of 351%, 249% and 170%, respectively.
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
