CHICAGO, MILWAUKEE—As reported in GlobeSt.com, CenterPoint Properties Trust just sold a 1.7-million-square-foot industrial portfolio with properties in the Milwaukee area and in the Southeast Wisconsin submarket to Westmount Realty Capital LLC from Dallas, one of the largest portfolio sales in the Midwest in recent years.
“In the larger sense the sale is a good example of what is happening in many secondary markets,” Erik Foster, principal and practice leader of Avison Young's Chicago-based industrial capital markets team, tells GlobeSt.com. “Capital is looking beyond core markets and going to smaller ones that are improving with tangible absorption and tangible rent growth.”
Other industrial markets such as Nashville, Memphis and Cincinnati are experiencing similar growth and also generating interest from institutional investors who want to avoid the intense competition, and lower returns, found in core cities. Since 2013, the smaller metro areas have “a better story for investors that want to put their dollars to work and get better returns.”
The sales price was not disclosed. Foster and Avison Young's Mike Wilson handled the sale for CenterPoint.
The portfolio includes buildings in the Milwaukee, Waukesha, Washington and Ozaukee County submarkets. And the Southeast Wisconsin submarket, usually considered an extension of the Chicago metro region, has been one of the hottest industrial markets in the region.
“I think investors see Milwaukee as a solid secondary market with a good manufacturing base,” Foster adds. Foster and Wilson, for example, recently sold another 12-building portfolio, totaling 1.2 million-square-feet, for CenterPoint near the Milwaukee General Mitchell Airport. The region's recovery has, however, lagged a few months behind other Midwest markets such as Columbus and Indianapolis.
In addition to the increased interest in secondary regions, Foster has also noted that many institutional buyers have started to focus on the less-popular submarkets within the core regions like Chicago, New Jersey and Los Angeles. This trend became noticeable about one year ago, he says, when CPA®:18 – Global, a non-traded REIT affiliate of W. P. Carey Inc., bought the giant Dart Container/Solo Cup National Distribution Center in University Park, IL, a suburb of Chicago, for $85 million. At 1,552,475-square feet, it was the largest Chicago-area transaction involving corporate distribution space since early 2006, and only a handful of recent deals in the nation approach its scale.
The Dart building had also attracted interest from a number of Canadian and other foreign investors, Foster adds. And “going forward, in 2015 and 2016 there is going to be more and more capital for quality product” in secondary markets and what might be called secondary submarkets within core areas.
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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.
