Modern bulk drove the market accounting for all the new construction and virtually all of the net absorption. This was expected as a number of modern bulk deals signed towards the end of 2005 were not scheduled to take occupancy until the first quarter of 2006. Some of these deals included Becton Dickinson & Co (653,000 square feet), Caterpillar Logistics Services Inc. (457,000 square feet), Arbonne International (209,000 square feet) and National Distribution Centers (154,000 square feet).
Despite this healthy level of absorption, overall vacancy increased from 6.8 percent at year’s end 2005 to its current level of 7.4 percent. It was reported previously that almost 2 million square feet of speculative bulk construction would be added to the market in the beginning of 2006, thus negatively impacting the vacancy rate.
However, vacancy will begin to lower amounts of space. Epson America, Inc. (751,000 square feet), Bekins Worldwide Solutions (240,000 square feet), DJ Orthopedics, Inc. (110,000 square feet), Moriden America (109,000 square feet) and Southwire (100,000 square feet) are all scheduled to move into new locations next quarter.
While it’s true that some of these companies are vacating space that will need to be backfilled (Epson is a prime example), the space being absorbed is considerably more than the space coming back online. Also, of the 1.7 million square feet of new construction scheduled for completion in the second quarter, only 700,000 square feet is speculative. Therefore, it should not adversely affect vacancy to the degree that took place in the first quarter.
Major deals signed during the first quarter include Ozburn Hessey Logistics (expansion to 400,000 square feet), Brightpoint North America, L.P. (322,000 square feet), Kid Glove (250,000 square feet), Haakon Industries, Inc. (202,000 square feet), Icon Transportation (127,000 square feet), DJ Orthopedics, Inc. (110,000 square feet lease), Cherry Man Industries (101,000 square feet lease) and Fundex (100,000 square feet).
While modern bulk dominated the industrial landscape, several other property types also faired well. Medium distribution posted occupancy growth totaling more than 100,000 square feet for the seventh consecutive quarter. Vacancy among medium distribution product has been reduced from 10.4 percent to 6.3 percent during that time.
Meanwhile, manufacturing has enjoyed 4 straight quarters of occupancy growth and vacancy reductions. Noteworthy among manufacturing space was Haakon Industries, Inc. purchase of 202,000 square feet in Lawrence. This marks the largest purchase of manufacturing space in the Indianapolis area in recent years. Finally, office/showroom posted its third consecutive quarter of occupancy growth. Vacancy for that property type has consistently held at 9.1 percent during that time.
All submarkets, with the exception of the Northeast and South, experienced positive net absorption to kick off 2006. Leading the way were the Southwest (957,000 square feet), East (431,000 square feet) and Northwest (202,000 square feet) submarkets.
