Industrial Market Steady despite Concerns over Subprime Loans

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Concerns over subprime loans and the direction of the stock market may be playing havoc with housing and with some commercial real estate deals, but so far the industrial market in the region seems unaffected.

That's the indication from two reports by commercial real estate companies Grubb & Ellis Co. and GVA Oxford.

Both say the industrial market is headed in a positive direction, although separate evaluations came up with different vacancy rates for the market.

"2007 is shaping up to be a very solid year," says Grubb & Ellis's "Industrial Market Trends Pittsburgh" report for the third quarter.

"Momentum continues," the report says, noting in excess of 1.1 million square feet at industrial building sites has been filled so far this year, including 250,000 square feet in the July-September period.

Vacancy declined to 8.3 percent marketwide, the company said, with top-of-the-line space performing even better with 7.6 percent of the inventory vacant.

"If the current pace continues, 2007 should finish the year with occupancy rates approaching 93 to 94 percent marketwide, with occupancy of premium space approaching 95 percent," Grubb & Ellis finds.

"The Pittsburgh industrial market has rebounded nicely despite the economic uncertainty of the national economy," says GVA Oxford, which is the commercial leasing arm of Oxford Development Co.

"The industrial sector showed increased signs of life and is forecasted to do well and be balanced throughout 2007" and in 2008, the company said in its Pittsburgh Industrial Market Overview.

At the end of the third quarter, the company finds a higher vacancy rate -- 13.3 percent, down from 14.5 percent in the second quarter. But it's figures also show a higher pace of absorption, with 1.7 million square feet filled in 2007.

Oxford's industrial market data comes from CoStar Group.

Among the recent industrial leasing deals cited in the Grubb & Ellis report are Shaw Industries' lease for 50,000 square feet in the Leetsdale Industrial Park; Moulding & Millwork Inc.'s lease for 52,000 square feet at the Tri County Commerce Park in New Sewickley; Tire Centers Inc.'s lease for 30,000 square feet at the Imperial Business Park in North Fayette; Calgon Carbon Corp.'s lease for 44,000 square feet at the McClaren Woods Business Park in Findlay; and All American Containers' lease of 55,000 square feet in the I- 70 Commerce Center in Belle Vernon.

GVA Oxford sites a number of other deals, such as Schwartz Technical Plastics expanding with 20,000 square feet at the Ambridge Regional Distribution Center and U.S. Steel Corp. committing to lease 33,000 square feet at One Linden Street at the Duquesne City Center industrial park.

While leasing deals were filling space, plans for a number of new industrial facilities moved forward and property sales were completed, including Sun Life Financial Inc.'s $22.6 million purchase of the seven-building, 407,000-square-foot 79 North Industrial and Research Park in Aleppo.

Knepper Press Corp., an Oakdale printing firm, received approval from township officials in Findlay to build a 100,000-square-foot building that will house its headquarters.

"So far we haven't seen anything happen, not even a hiccup, as far as financing for industrial deals in this market," said Louis Oliva, industrial broker with Grubb & Ellis. "I've been hearing things nationally have been slowing down a bit, but so far we haven't seen anything locally."

Real estate notes:

Response from future tenants to Tanger's new outlet complex in Washington County has meant an increase in the size of the initial phase from 308,000 to 370,000 square feet. About 61 percent of the space has been leased and an additional 20 percent is out for signature, the Greensboro, N.C.-based company said in its third- quarter report. …