April 2018 - Sachse Construction
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Month: April 2018

Strong Automotive Market Spurs Industrial Development

by Sachse Team

The industrial property market is charging ahead at a rapid speed as large leases and developments dominate metro Detroit.

While new offices get considerable attention, one of the driving forces in the Detroit real estate market is how well industrial space is performing. In 2017, there was a 50 percent increase from 2016 in the number of large leases of 150,000 square feet or more. That signifies a healthy market and in some cases is helping trigger a speculative building rush as companies like Ashley Capital and others are putting up new properties in Hazel Park, Auburn Hills and elsewhere.

Much of the activity can be attributed to the automotive industry, which when performing well ripples out to automotive suppliers and other companies, causing a need for more space.

“The vacancy rate is just silly,” said Paul Hoge, agent/broker at Southfield-based Signature Associates Inc. “I’ve been doing this (since) 1981. In some communities, it’s under 3 percent. It makes it very difficult to find product for customers.

“You’ve had sustained years of high-level car sales and no matter how much we try and diversify our state’s economy, it’s still driven by the health of the auto industry,” Hoge said.

According to a first-quarter market report from the local office of Newmark Knight Frank, a brokerage firm, the industrial market has 388 million square feet with a vacancy rate of 5.1 percent and an average asking rent of $5.06 per square foot. A year ago, there was a 5.5 percent vacancy rate and the average asking rent was $4.84 per square foot. More than 8 million square feet of new space has been added to the market in the last year, according to the report, with 2.58 million added in the fourth quarter alone.

Last year, there were 29 deals of 150,000 square feet or more averaging 201,781 square feet for a total of 5.85 million square feet, compared to 19 deals in 2016 of that size. The average was 459,282 square feet for a total of 8.27 million square feet. The activity last year was also geographically diverse, with large leases inked in Dearborn, Farmington Hills, Pontiac, Warren, Allen Park, Mt. Clemens and Highland Park, among others, with companies like Comau, Keystone Automotive Industries, Piston Automotive Group and Penske Logistics LLC taking new space or renewing or expanding.

Even into the first quarter of this year, properties such as the Livonia Corporate Center are seeing activity, with Penske Logistics taking 590,000 square feet, Experi-Metal Inc. taking 182,000 square feet and Landsberg Orora taking 81,000. In Auburn Hills, Westcast Industries Inc. took 128,000 square feet at 3300 University Drive and Esys Corp. took 124,000 at 1000 Brown.

“We still remain optimistic even though we may not see the millions of square feet of new construction we saw in the years before,” said Dan Labes, an industrial real estate expert who is senior managing director in the Southfield office of Newmark Knight Frank.

“Everyone is still very optimistic that we are still moving forward. For three years they have been saying we are in the ninth inning (of the strong market trends),” Labes said. “So are we in extra innings now? The suppliers are all doing well and auto sales are still strong. I don’t see a reason why there should be any slowdown.”

Which Office REITs Stand to Gain the Most from Amazon’s HQ2 Choice?

by Sachse Team

In economic development circles, today’s most popular guessing game centers on where e-commerce goliath Amazon will put its highly coveted second headquarters. Will it be in Washington, D.C.? Or will Atlanta win the Amazon derby? And how about Boston?

In all, 20 finalists—encompassing 16 U.S. metro areas in addition to Toronto—are vying for Amazon HQ2, a $5 billion project that’s primed to generate 50,000 jobs. Whichever region lands this economic prize is guaranteed to see a massive spike in office activity, considering that Amazon HQ2 seeks to eventually occupy 8.1 million sq. ft. of space. Plus, HQ2 is bound to create spin-off benefits for the broader office market.

All of this buzz prompts the question: Which office REITs stand to gain the most from Amazon HQ2? REIT analysts offer some educated, but speculative, guesses.

Jed Reagan, an office REIT analyst at research and advisory firm Green Street Advisors in Newport Beach, Calif., says that among office REITs, Chevy Chase, Md.-based JBG Smith Properties and Philadelphia-based Brandywine Realty Trust could be the biggest beneficiaries of HQ2. Why? Both REITs own sites that could accommodate most or all of the growth needs of Amazon HQ2, Reagan says.

JBG Smith’s mixed-use portfolio comprises about 20 million sq. ft. of office, multifamily and retail space in the D.C. market. Its development pipeline contains more than 17.9 million sq. ft. worth of projects.

The REIT, a spin-off of New York City-based REIT Vornado Realty Trust, is the dominant property owner in Crystal City and Pentagon City, two D.C. suburbs in Northern Virginia. One of the HQ2 finalists is Northern Virginia, which many prognosticators peg as a solid contender to secure the Amazon project.

Late last year, New York-based Third Avenue Real Estate Fund made a $10 million stock bet on JBG Smith with the hope of Northern Virginia scoring HQ2.

In December, the fund speculated that if D.C. is selected for HQ2, “JBG Smith is likely to be a big winner as its Crystal City and Pentagon City locations are natural candidates for Amazon to utilize as it initially relocates employees to the region. Further, JBG could be a terrific partner for Amazon to work with as it looks to build out additional space to accommodate the company’s demand for modern and well-located property.”

Also high on Reagan’s list of office REITs that could see a big bump from Amazon HQ2 is Brandywine. As of March 31, the REIT’s portfolio consisted of 185 properties totaling 25.3 million sq. ft. Brandywine’s core markets include D.C., Philadelphia and Austin, Texas, all of which are Amazon HQ2 finalists.

Brandywine has pitched sites in Philadelphia (Schuylkill Yards) and Austin (IBM’s Broadmoor campus) for Amazon HQ2.

Aside from JBG Smith and Brandywine, Reagan says a number of other office REITs could, through a spillover effect, benefit indirectly if Amazon picks a market where the REITs have a concentration of properties.

“The office REITs own properties in many of the same markets that Amazon has selected for its top 20 list and are drawn to many of the same attributes that Amazon is searching for—well-educated workforces, vibrant economies and attractive business climates, to name a few,” Reagan says.

Matt Kopsky, a REIT analyst at Des Peres, Mo.-based investment firm Edward Jones, says he doesn’t think one particular office REIT stands out in the quest for Amazon HQ2. But he does point out that Raleigh, N.C.-based office REIT Highwood Properties Inc. owns assets in four of the potential HQ2 markets (Atlanta; Nashville, Tenn.; Pittsburgh; and Raleigh, N.C.), while Boston-based office REIT Boston Properties Inc. in three prospective HQ2 metros (D.C., Los Angeles and New York).

Office landlords in whichever metro area Amazon picks will see a “big benefit” from HQ2, Kopsky says.

“For office, it should help tighten the market, as demand will significantly increase, which in turn will lift property values and support higher rent growth, all else being equal,” Kopsky says.

He adds that: “It could spur a ripple effect in that submarket, as the winning city may increase infrastructure investments and more companies may follow suit to the city, given the influx of talent, which may result in incremental population growth above and beyond the 50,000 Amazon employees.”

However, Kopsky notes that Amazon HQ2 most likely will occupy a massive build-to-suit development, which will increase office supply in that submarket and partially offset some of the heightened demand for office space.

Barry Oxford, a REIT analyst at investment firm D.A. Davidson & Co. in Great Falls, Mont., says that from his perspective, Boston Properties and, to a lesser extent, Brandywine are the office REITs that are best positioned to gain from Amazon HQ2, based on D.A. Davidson’s view that Amazon is leaning toward the D.C. market.

In citing Boston Properties, Oxford notes that the REIT has a track record of developing major corporate headquarters, such as Salesforce’s gleaming new office tower in San Francisco. “I can’t imagine that if Amazon is moving to Washington, D.C., that they wouldn’t at least be interested in talking to Boston Properties,” he says.

LinkedIn Signs Lease for Downtown Detroit Space

by Sachse Team

Career and employment website LinkedIn is expanding to a larger office space in downtown Detroit.

The online business networking service will move its nearly 40 employees to the historic Sanders building at 1523 Woodward, between Clifford Street and Park Avenue.

In August, the company announced it would be opening a Detroit office, its first new office in the U.S. in 10 years. LinkedIn said it had chosen Detroit over nine other cities “to be a part of an exciting economic turnaround story.” Starting with 13 employees in October, it moved temporarily into WeWork shared office space in downtown Detroit.

On Friday, the company said it has signed a lease for space in the historic Sanders Building, located at 1523 Woodward Ave. between Clifford Street and Park Avenue.

“With 74,500 square feet of space, the Sanders Building gives us room for future growth and the opportunity to become part of the lower Woodward corridor community in the heart of downtown,” officials said in a statement. “Renovations are underway and we look forward to moving into the new space within the next year.”

Downtown Detroit increasingly has become a magnet for technology companies. Quicken Loans was one of the first technology companies to move and expand downtown. Google announced last fall it was opening a Detroit office next to Little Caesars Arena. Microsoft, Amazon and others also have offices in the city.

Based in Sunnyvale, California, LinkedIn has more than 10,000 full-time employees with offices in 30 cities around the world. Its online professional network has more than 500 million members in over 200 countries and territories.

Ford’s Corktown Vision Takes Shape

by Sachse Team

Ford Motor Co.’s potentially transformative vision for a corner of Corktown, Detroit’s oldest neighborhood, may be taking a step forward.

Even as the Dearborn automaker remains deep in talks to acquire the historic Michigan Central Depot from the Moroun family’s Central Transport International Inc., Ford is in “discussions” to buy an old brass factory at 2051 Rosa Parks, says a source familiar with the situation.

That’s adjacent to what Ford calls “The Factory,” the new Corktown headquarters at Michigan and Rosa Parks soon to house its autonomous and electric-car groups under what it calls Team Edison. Expanding Ford’s presence there developing next-generation autonomous and mobility technology would make an emphatic statement about Detroit’s revival — and the Blue Oval’s role in it.

The upshot: Ford is moving to assemble parcels that could become part of an urban business campus on the western edge of downtown. The automaker’s fully realized vision, pushed ardently by Executive Chairman Bill Ford Jr., would be anchored by a renovated train station, for way too long a symbol of Detroit’s urban and industrial decline.

Negotiations over the station, pending structural and environmental due diligence, are progressing, but an agreement is said to be at least two months out. Representatives for Ford and the Morouns’ real estate arm declined comment.

Mike Koenigbauer of Friedman Real Estate, the broker representing the seller, this week told The Detroit News the property at 2051 Rosa Parks, built in 1921, has been under contract for several months and that a potential closing of the sale appeared near. He did not offer a timeline. The building owner, Angel Gambino, was contacted several times this week but said she was unavailable to speak about the property.

 A marketing brochure for the property — called “The Alchemy” — pegs the asking price at $2.5 million for two parcels. The larger, 2.75-acre site sits on the west side of Rosa Parks and features an 87,000-square-foot building that could be delivered vacant or redeveloped. The second parcel is a parking lot on the east side of the street totaling a little more than an acre.

And this week, the 28,000-square-foot Ponyride Building at 1401 Vermont in Corktown was listed for sale. Asking price: $3.5 million for the “immaculately maintained” two-story building with “unlimited potential … in the ever popular and bustling Corktown neighborhood,” the listing says. City property records show the building’s current owner paid $100,000 for the building in 2011.

Ford is scouting additional parcels in the area, including some controlled by the Detroit Land Bank. How extensive the automaker’s envisioned campus would be depends on its ability to craft a deal with the Morouns for the 504,588-square-foot behemoth and its 18-story office tower that opened in 1913.

The station closed 30 years ago, ever since looming over the west side and its freeways like a toothless hulk synonymous with Detroit’s own “ruin porn.” Reviving it as part of Ford’s own riff on Auto 2.0 could spark a remarkable transformation for a neighborhood coincidentally named for the Ford family’s ancestral home, County Cork, Ireland.

And with its opening of The Factory at 1907 Michigan, building a Ford campus in Corktown would underscore the automaker’s return to the Detroit it left 22 years ago after the sale of the Renaissance Center to rival General Motors Co. — and the city where founder Henry Ford started building cars 114 years ago.

The symbolism is powerful. For Detroit, hungry for yet more validation as a legitimate business hub with reviving neighborhoods. For Ford, eager to play a part in the reinvention of a Detroit it gladly left a generation ago. For the Motor City’s future, built on its legacy of being the town that helped put the world on wheels.

If Bill Ford’s Corktown play becomes reality, the result could help the automaker attract next-generation talent because Ford’s involvement there would signal its role in shaping a new Detroit. And it would diversify the neighborhood’s business district, now deep in bars, restaurants and a distillery.

The pieces are there: the good bones of historic buildings in a historic part of town; the confluence of city streets, freeways, rail lines, even an international border crossing for testing mobility services and self-driving vehicles; the capital of a global automaker trying to chart its second century.

Ford’s bid to plant the Blue Oval in the heart of Corktown looks serious. Whether it actually is depends on the details.

Lots of New Supply Is Leading to More Concessions in the Office Sector

by Sachse Team

With new office construction currently topping 100 million sq. ft., the office market is beginning to turn in favor of tenants in some markets. “The pendulum is swinging toward tenants in cities with a supply-demand imbalance driven by new construction,” says Scott Homa, senior vice president and director of U.S. office research with real estate services firm JLL. Homa notes that high levels of new construction are creating weakness for lower quality buildings, as well as overhang in new deliveries.

“Deceleration in the broader U.S. office market has occurred over the past 36 months with reduced absorption, and expansion now more confined than in 2016,” Homa says. “If you strip away co-working market, the office market has actually contracted in first quarter 2018.”

Competition for tenants in markets with an oversupply problem is pushing concessions higher, according to a first quarter 2018 JLL office report, which noted that while office rents grew overall by 1.6 percent in the first quarter, rent gains were outstripped by tenant concession packages. Allowances for tenant improvements (TIs) rose 3.5 percent in the first quarter to an average of $75 per sq. ft. That figure was even higher in markets where there is a lot of competition for tenants—up to $150 per sq. ft. for trophy properties.

The exceptions include Seattle and Los Angeles, where net effective rents are outperforming markets like New York, Chicago and the District of Columbia. Net effective rents are flat or diminished by aggressive concessions in these three markets, which also account for more than one-third of all new construction underway, with 15.4 million sq. ft. rising in New York, 7.3 million sq. ft. in Chicago and 7.6 million sq. ft. under construction in Washington, D.C. The JLL report notes that any new office deliveries will exacerbate oversupply in these gateway markets, which are already being negatively impacted by rightsizing and consolidating firms.

Meanwhile, the Seattle and Los Angeles office sectors remain tight, with 4.8 million and 2.2 million sq. ft. under construction, respectively. Expansion of tech companies is driving the office demand in Seattle, while companies representing the intersection of entertainment and technology—Netflix, Amazon, Hulu—are largely responsible for strong office performance in Los Angeles.

While extraordinary concessions are offered in markets with an oversupply of new office product, Homa says, “We’re not seeing a reset in base rents—in most cases landlords are preserving or even raising face asking rents.” He notes that new product generally commands a 25 to 50 percent rent premium over second-generation office space, but concessions help to make the price tag more palatable to tenants, thereby reducing sticker shock.

John Galaxidas, president/CEO of San Diego-based Synergy Real Estate Group, Corporate Advisory, Inc., a national brokerage firm that specializes in tenant representation, says, “Landlords in California markets don’t offer many concessions unless you push for them.”

This is because demand is not keeping up with supply, he adds, pointing out that there is little new construction in major California cities, as there is not enough entitled land available for development in large CBDs. In addition, the entitlement process is a long, arduous and extremely expensive one compared to markets like Houston and Dallas, which are development friendly with less regulations, fewer planning/zoning restrictions and lots of land available for expansion.

The greatest concessions in large California cities for space in new buildings according to Galaxidas, include several months of free rent on a five- to 10-year lease, if rental rates are high enough to justify it, and a hefty TI allowance, as extensive tenant improvements are required for interiors that are in shell condition.

“The difference when a tenant goes into second-generation space is a landlord isn’t going to pay for much in the way of improvements, because the space has previously been built out and, due to high demand and short supply of space, [the landlord] is less willing to do improvements,” he adds. For new product a tenant may get up to $60 per sq. ft. in TI allowance, but the figure goes down to $10 to $15 per sq. ft. for second-generation space.

Other concessions landlords may be willing to provide include: early occupancy equating to one to two months of additional free rent; the option to renew at a fixed incremental rate, rather than market; and “first right of refusal or relocation,” a provision in the lease agreement that allows the tenant to expand or move to a larger space when the company outgrows the original space.

Houston-based Stuart Showers, director of research services at real estate services firm Transwestern, notes that companies are becoming more thoughtful about the impacts of their real estate decisions on employees. “As such, there is a big appetite for new office space, as the latest wave of office construction is more efficient and offers the type of amenities occupants need to attract and retain talent,” he adds, noting that all types of firms, from tech and creative firms to legal, financial and professional services companies, desire state-of-the-art office space in quality locations.

But the most attractive office space by far, according to Showers, is in mixed-use projects, which command up to a 30 percent rent premium over stand-alone, competing projects. “The retail mix in these projects is more thoughtfully planned than in the past,” Showers adds, noting that projects generally include a fitness facility and an attractive variety of food, bank and other services that offer occupants convenience and choice and help tenants attract and retain talent.

Showers points out that while this type of project has been around for a long time in high-density markets like Boston, New York and Los Angeles, it is a more recent addition to the Houston marketplace.

While Houston continues to see demand for both new and second-generation office space retrofitted with amenities, Showers says one-fourth of office inventory is listed as available for lease due to both overbuilding and an abundance of space exited by energy companies. New construction, therefore, presents a challenge, with competition for tenants heated and concessions generous, with landlords routinely offering a year of free rent on a 10-year lease and exceptional TI packages.

“Interestingly, owners are better funded than in the past, giving them the wherewithal to do ‘financial engineering’—increase TIs and free rent—to preserve base asking rent and get the bumps they want,” he adds, noting that once the free rent period ends, the rents justify the losses.

From Fitness to Bowling Alleys: How Commercial Office Buildings are Differentiating Themselves Through Amenities

by Sachse Team

Historically, New York commercial buildings have not needed to offer amenities to stand out. The city served as the office backyard, providing food, fitness, and sub-cellar bowling alley experiences. Now, buildings are full of them. The competition amongst developers and building owners to lease space is so fierce that the need to differentiate is more important than ever. Today’s employees are sophisticated consumers who are choosing where they want to work based on specific preferences. Understanding how amenities can support their growing demands is key to unlocking a building’s differentiation strategy. In the tightly competitive commercial leasing market, how can a property stand out relative to its peers and support its tenants?

Here, we offer five ways that amenities can help developers and building owners attract and secure tenants by appealing to their inhabitants:

1. Embrace the Neighborhood and Building Authenticity 

The amenities that a building owner elects to implement are ultimately a manifestation of the building’s values and a direct reflection of its tenant population’s perceived brand image. Therefore, services and offerings must be tailored and in direct alignment with the culture of the building’s population. For example, a shared game room is more affiliated from a cultural perspective with a Midtown South tech-centric boutique building than a Hudson Yards high-rise intended for law firms and hedge funds.

Some new high-rise towers in Midtown are focusing on attracting global, sophisticated high-end financial or professional services firms. A hospitality service model with club-like offerings is the best approach to attracting this type of tenancy. One in particular will offer a conference suite, which will be supported by a concierge, a fine dining restaurant, full-service bar, a flexible town hall, and a business lounge.

2. Understand Your Target Audience 

Commercial real estate companies have had to adjust to competition from co-working spaces as tenants pack employees into smaller offices. While tenants benefit from amenity-rich buildings as a recruiting and retaining tool, they also benefit from being able to be more efficient with their space. For example, a tenant may be able to reduce its internal conference rooms where the building offers extensive conference facilities and fit in more employees.

In envisioning One World Commons, the amenity floor on the 64th floor of One World Trade Center, The Durst Organization wanted to create an environment that could build community for all the building’s inhabitants. It was important to design a series of spaces with programs that young media and tech tenants in the building could take advantage of, from Condé Nast to High 5 Games to Mic. The result is a grab-and-go café, a game room, a business lounge, and a multipurpose room that could be sectioned off for private events. By providing lunch and conferencing facilities, the amenity floor now serves as a programmatic supplement to future tenants looking for space in the building, affecting their own design and real estate decisions.

3. Create a Curated Ecosystem  

Amenities should be designed to boost employee productivity, keep people on-site longer, and provide convenience, with the goal to maximize employee time to explore personal ideas. “Gained” time should inevitably result in some sort of value or increase for a tenant’s bottom line. “Found” time can be generated in different ways depending on the type of tenant and the industries that they are in, from idea production to dry cleaning pick-up.

At the Tata Innovation Center at Cornell Tech, a partnership between Forest City New York and Cornell University, the shared amenity space was purposefully designed to encourage mutually beneficial interactions with other tenants on the same floor and external visitors. Such spontaneous conversations would maximize idea generation and partnerships, simplify processes, and build business connections, ultimately impacting the tenants’ bottom line.

4. Align a Holistic Building POV 

Design has the capacity to self-curate certain types of industries and prospective tenants. Like consumers, companies tend to be attracted to personalities and brands that most align with their own point of view. The base building is the first interaction that an employee has with their workplace environment, so this experience should be consistent, from street to seat.

Equity Office’s Park Avenue Tower sought to deliver a financial services product from top to bottom as a cohesive design story with a bespoke brand. They developed a fast and efficient turnkey program that allows for semi-customizable move-in ready suites that have the look of a customized office space. This spoke directly to the fast-paced world of hedge funds and financial services firms. The heavily amenitized building begins at the plaza, extending into a newly renovated lobby, and into the lower level, which is now known as the Hedge Fund Club. The link between all of the spaces and environments in Park Avenue Tower is a consistent attitude that enables the building to have a strong identity.

5. Provide an “On-Site Off-Site” Mentality  

Amenities also function as an escape from the typical workplace environment, providing a “third place” option for employees to slip into for social interactions or more focused work. As office environments become increasingly more dense, tenants are having to provide more choice to their employees through space type variety.

At 21 Penn, the overarching goal was to provide an “on-site off-site” for tenants to drop down to throughout the day, as an extension of their own office upstairs. The ground floor club will feature a gaming area with a fireplace, serviced by an outside operator for socializing and encouraging coworker interactions. In addition, a library with phone rooms will supplement the workplace floors, offering quiet focused space that might not exist on the actual tenant floors.

Ultimately, the best buildings put their tenants at the forefront, and the best companies invest in their talent. A successful amenity offering elevates the everyday experience by leveraging the authentic personality of its tenant population and allows them to work, think, and create better.

Higher Interest Rates Mean More Renters for Apartment Sector

by Sachse Team

The steady rise of mortgage rates presents a good-news/bad-news situation for the multifamily property sector, according to CoStar research.

While any bump in interest rates increases borrowing costs for apartment developers and other commercial real estate projects, it also makes it harder for would-be homeowners to qualify for mortgages, which results in more demand for apartments.

Recent research from CoStar posits that for every rise in home mortgage interest rates, thousands of renters who may be looking to buy homes are priced out of qualifying for a mortgage – thereby remaining in the pool of renters.

On the other hand, this group of renters is more likely focused on affordable and mid-priced rentals rather than the most expensive luxury units that most developers are building.

CoStar’s analysis weighs a number of factors in determining the reduction in potential new homeowners resulting from interest rate increases – including a market’s median income, the market’s average home prices, and other factors.

“Assuming that up to 30 percent of a household’s income can be designated for monthly mortgage payments [under commonly accepted mortgage qualification guidelines], a 100-basis-point increase in the 30-year fixed rate would reduce the nation’s potential homebuyer pool by approximately 4.2 percent, or 5.3 million households,” according to a report authored by Boston-based managing consultant Jeff Myers, of CoStar Portfolio Strategy.

The average interest rate on a 30-year, fixed-rate mortgage has inched up from a low of 3.4 percent in mid-2016 to about 4.4 percent now – about 100 bps. And more increases are expected.

The increase in interest rates effectively increases, or preserves, the number of renters. The number of households unable to buy a home due to the rise in interest rates varies by market, but across the top 52 U.S. markets the number ranges anywhere from slightly more than 2 percent to a little more than 5 percent.

In New York City, for example, that means 202,068 households that would have qualifed to become homeowners remain as renters – a change of 3.74 percent – due to interest rate increases. In Chicago, 122,260 households effectively missed out on buying (3.5 percent), while 106,120 (3.98 percent) households in Dallas, and 59,496 (5.17 percent) in Denver also stayed renters.

In Boston, 82,018 (4.39 percent) would-be homeowners continue to rent, and in Los Angeles, 114,441 (3.59 percent) fewer households become homeowners.

Michael Fratantoni, the chief economist for the Mortgage Banker’s Associate, a trade group based in Washington, D.C., points out that a variety of factors influence homeownership rates, and a modest bump in mortgage rates shouldn’t have an outsized effect. At any rate, he points out, demographics favor increased homeownership rates after a dramatic drop-off during the recession.

“When I think about homeownership, the decision is driven by different variables, including but not limited to mortgage rates,” he says. “People get to a stage in their lives when they put more value in things like schools and yards; peak ownership is around 31, and we have a large population getting to that age. The demographic trend is pushing towards more homeownership.”

To be sure, the interest rates for home mortgages remain historically low. Before the housing implosion in 2008, interest rates hovered around 6.5 percent; in 2001 they averaged 8.5 percent and in 1990, they clocked in at 10 percent.

But interest rate hikes, coupled with tight single-family home supply and the attendant soaring prices, are keeping homeownership below historical averages.

Columbus’ Industrial Market Continues To Rise

by Sachse Team

This metro area’s robust distribution market has recently brought in some of the nation’s most important developers and investors, and another big player is ready to jump in as well. Xebec just purchased 106 acres southeast of the city and near the Rickenbacker Inland Port, the largest cargo-dedicated airport in the world. The Dallas-based company plans to develop in several phases the Groveport Logistics Hub, a master planned campus with five class A warehouse buildings ranging from 120,000 square feet to one million square feet.

“The logistics cluster surrounding the Rickenbacker Airport is one of the most strategic regions in the world for modern logistics,” says Randy Kendrick, founder and chief executive officer of Xebec. “With its vast consumer reach, this Southeast Columbus submarket is poised for continued growth and demand for high quality distribution and warehousing space with a special emphasis on the e-commerce space.”

Although Columbus was once known primarily as an office center, the growing need for distribution centers has made the metro area into one of the most prominent distribution corridors in the country. Truckers here can reach nearly half of the US population in a day’s drive, including the all-important East Coast. And distribution spaces near Rickenbacker can forge links with freight hubs in Asia, Europe and the Middle East.

Xebec plans to invest roughly $90 million to develop its new hub and plans to break ground this summer on Phase 1. The company plans to build four speculative warehouses ranging from 120,000 square feet to 160,000 square feet. It will also construct a “super pad” for a one million-square-foot build-to-suit facility.

“Lease demand in the market has remained strong with less than 3% vacancy and all-time-high lease rates for modern bulk warehouse facilities on triple-net terms,” says Kendrick. “With the ability to plug into one of the most robust e-commerce supply chains in the world, we believe Columbus will remain a vital location for both logistics and fulfillment by national and global retailers.”

Xebec’s new hub borders industrial users to the east and OH Ste. Rte. 317 to the south. It is approximately two miles from the airport, three miles from the I-270, and five miles from the Norfolk Southern Rickenbacker International Intermodal Terminal.

“We believe Groveport Logistics Hub is the next logical site in the path of development in the Rickenbacker logistics cluster,” adds Kendrick. “This investment fits our national build-to-core strategy to develop highly functional product to meet specific, unique demands in each of our target markets across the US.”