Ostendorf-Morris Releases Fourth Quarter 2011 Industrial Market Report

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US Industrial Market Slowly Improving

Vacancy rates across the nation have slowly continued to fall since the 1st quarter of 2010. Part of the reason is that new building construction has been at a near standstill. Companies in the industrial sector have slowly begun to expand operations in small segments but the overall translation into new jobs has been sluggish at best.

A major player in the slow growth in the industrial markets is due to uncertainty with the European debt crisis and the additional fiscal issues the European Union is facing. 4th quarter growth in the industrial real estate market will hinge on whether or not international markets will continue to grow alongside US projections of economic growth.

Expect very little new industrial construction in the 4th quarter and rental rates should drop slightly or remain stable as businesses wait and see what the future markets might hold for them. The next important factor is to see if the payroll tax cut is extended into the new year. That will be the crucial piece for continuing growth in 2012.

US Industrial Economy Waits for EU

The slow growth in the industrial sector of the US economy has been a hot topic and any change is dependent on factors abroad. International factors like the European debt crisis control the future of industrial growth of American products. If Europe can balance its problems and remain out of another recession it will still be a huge market for manufacturers where they will readily purchase US goods.

Second, is the influence of Southeast Asia and the new free trade agreements recently signed with the US. This will open up new markets for American manufacturing to sell more products and make goods readily available for sale in that region. Currently, China has the majority stake and the US will be able to compete with the new trade agreements in place.

Northeast Ohio Market Remains Steady

The Cleveland region has continued to maintain a steady pace in industrial and manufacturing sectors. Vacancy rates have remained constant with relatively no change from the 2nd quarter lingering close to 8.3%. Rental rates have also remained steady with no real change. This can be attributed to the stagnant growth and future uncertainty in the economy. The average cost hovered around $4.22 per square foot for commercial industrial space in Northeast Ohio for the 3rd quarter.

The southeast side in Cleveland and the city of Mentor are the big winners in terms of positive absorption rates. There was nearly 700,000 square feet absorbed in these combined areas in the last quarter.

Growth in the 4th quarter will depend on a variety of factors. US manufacturing of goods will continue to grow provided confidence in the economy improves. Northeast Ohio should be a direct beneficiary of this economic scenario. However, this growth hinges on financial issues facing Europe and the implications of recent disasters slowing production in Southeast Asia’s international industrial facilities.

Midtown: Cleveland’s Next Success

Downtown Cleveland’s revival and its construction projects often overshadow the successful development happening in the old industrial hub of Cleveland’s Midtown District. Companies are beginning to reinvest and expand where the memories of Cleveland’s former age of industrial prowess have long since faded.

Located near the Cleveland Clinic and University Hospitals makes this a natural location for medical product research and manufacturing. Tax incentives and grants provided by the city also provide an opportunity to renovate unique space for any type of business.

Midtown has the benefits of suburban industrial complexes near the urban center, educational institutions, and the culture provided by Cleveland’s entertainment assets.

About Ostendorf-Morris

As Ohio's largest independent full-service real estate company, Ostendorf-Morris is a leader in Northeast Ohio's commercial property market. Since 1939, Ostendorf-Morris has been providing clients creative, comprehensive real estate solutions.

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Jonny Prell
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