Spec Developers in Cincy Finding Tenants

Wayfair’s new building in Hebron, KY, under construction by Dermody Properties over the winter.

CINCINNATI—Developers have built 4.7 million square feet of speculative bulk distribution space built in this metro area since 2014, and less than 850,000 square feet remains vacant, according to a new market report by Cushman & Wakefield . “With few exceptions, the leases on these bulk distribution buildings were signed within nine months of each building’s completion,” the firm notes. Wayfair Inc. recently took occupancy this spring of its nearly one-million-square-foot Hebron, KY, a key submarket that has become an important national distribution center. And with developers set to complete another 2.5 million square feet of bulk space before the end of the year, observers here wonder whether tenants will continue to materialize. As of July 1, developers have yet to pre-lease any of this new bulk space. C&W expects that the deliveries will likely to reverse Cincinnati’s recent downward vacancy trend in one of two ways. “The new buildings will remain vacant or departing tenants from existing buildings will leave sizeable vacancies in older class A and class B buildings.” Overall vacancy currently stands at 4.0%, a 16-year low. The second quarter was the sixth consecutive quarter with a market vacancy under 5%. Within the bulk distribution category, overall vacancy stands at 4.1% while class A vacancy is just 3.0%. That means both rates shrank nearly 100 bps in just three months. Quarterly net absorption was 1.6 million square feet, according to C&W, which brings year-to-date net absorption to 2.4 million square feet. “The market has now seen 20 consecutive quarters of positive net absorption.”