Industrial Leasing Market Update

[Ronald Rohde]

Hi guys,

Wanted to share some insights from the latest in industrial leasing. In Texas, landlords of good properties continue to have strong leasing power to drive rents and concessions from tenants who need space to expand their business. Couple this with high out of state demand, e-commerce eating everything that can function, there's not a lot of legal wiggle room for tenants. Rate increases seem almost guaranteed if you're buying now.

Is anyone seeing different reactions in their sub-market? I handle leases nationwide, but its a lot of the same story.

Ron

[Andrew Tripp]

Chicago investor here, and it is virtually the same story in this market.  Some submarkets are holding better than others, but any submarket that attracts institutional-level capital is tight on the leasing side all the way down to the Class C product even with a ton of spec space coming on line at the top of the food chain.  Largely similar on the sale side as the institutional capital pushes out on the risk spectrum because core pricing is so crazy causing the opportunistic value-add players to push farther out as well, and so on down the line.  Class B product might be even tighter as there just isn't much supply in that space (everyone loves functional 100,000 sf buildings!).  

Now, we concentrate on the low end of the O'Hare submarket (small bay, Class C), and it seems like there is a bit of a slow down on the sales side in the small bay product.  I would attribute this to a couple factors.  One, I think a good number of users in this space are not making majors moves with their businesses unless they absolutely have to until COVID largely passes.  Two, since these are by definition the riskiest tenants, some buyers in this space are also in wait in see mode while sellers hold on pricing.  We see this as opportunity, and in fact are considering raising outside money to take advantage.  But some other small "mom and pop" investors aren't as bullish it seems.  

Happy to discuss further offline!