For the most part, I serve the Greater Cincinnati/Northern Kentucky industrial real estate market. When I go outside this MSA it’s usually with the help of a local broker, most often an SIOR. But to focus on this local market under a healthy national umbrella, it’s worthwhile to examine where things stand.
I live and work in West Chester, an area 22-26 miles north of the City of Cincinnati and the Ohio River, which is the State Line between Ohio and Kentucky. This Northern Market is one of two that dominates the industrial landscape, the other being northern Kentucky.
Contrary to many preconceived notions about this market being in a stagnant, rust belt area, the Greater Cincinnati industrial scene is lively and active. The two markets referred to are strong and growing.
The Northern Kentucky Market, using the now-defunct Xceligent parameters (which were the best in the market, with peer review by active brokers) consists of about 65 million square feet with under 4% vacancy, most of which is in new spec bulk buildings. This is in an overall Greater Cincinnati Market of about 270 million square feet, so represents a little less than a quarter of the overall market – but it’s arguably the most important.
But let’s confine this, for now, to the Northern Market. Amazon and DHL have controlled the news in Northern Kentucky in an already steaming market. But it’s been well-covered.
The Northern Market, with West Chester as its center, consists of roughly 96 million square feet – or just under 36% of the market. As would be expected, going from south to north in this market segment, the oldest building population is in the south, the newest in the north.
It’s important to note that our industrial market in Cincinnati/Northern Kentucky straddles I-75, the most heavily-traveled highway in America, Automotive Alley, stretching from Canada through Michigan to Florida. And the 2 markets mentioned herein, representing 60% of our overall industrial market, have grown as a result.
But regarding West Chester: when I moved here 40 years ago, it was a sleepy little rural suburb called “Pisgah” with 17,000 residents. By 1990, it had climbed to 40,000sf. Now it’s 61,000.
The biggest driver of commercial real estate growth in West Chester was the opening of a new I-75 interchange just over 20 years ago in late 1997. Since that time, there has been over $3.5 billion invested in commercial property, with over 34 million square feet of new construction, and just in the Union Centre area alone, over 40,000 new jobs created.
Rust belt, indeed. Around the time of the new interchange opening (which today has 50,000 vehicles/day using the interchange) the economy was in full bloom, 2 years from slowing down (and then crashing after 9/11), and there was a flurry of big speculative industrial distribution investment around I-75. On 9/11/2001 there were 5 spec buildings totaling 1.7 million square feet waiting for tenants. They eventually all leased, though it took awhile, then in 2007, just before the next downturn, DCT built two spec buildings almost five miles west of I-75, a marginal location totaling almost 800,000sf. They sold the buildings to Founders/Opus. Later Founders/Opus built 2 more behind the original 2, about the same size, and they filled them as well. Then Clarion, in the third quarter of 2017, bought all four buildings for $102 million, or $64/sf, an unheard-of amount for buildings that far from the interstate.
Nothing illustrates the strength of a market better than that!
And industrial is today’s darling asset class. Office demand is unpredictable, with new workforce needs involving office “hoteling” (i.e. sharing space), people working from home, shifting millennial habits and locations. Retail disruption by e-commerce has been well-documented. Multi-family, booming since the housing crisis, has leveled out. But industrial, with the need for both traditional consumer/business goods growing, is growing even faster with the e-commerce warehouse need. And the stability of large, good-credit distribution centers drives up demand. But absorption of the space seems to keep pace, and there is no supply/demand imbalance threatening the market.
What a great time to be an industrial real estate Broker!