The industrial tortoise seems to have turned warehouse hare.
The leased bulk warehouse market, where space usually empties and fills slowly, shot ahead the past year with statistics not seen since the last century, according to Price Edwards & Co.'s 2012 Mid-Year Industrial Market Summary.
The vacancy rate plummeted from 20.4 percent to 6.5 percent vacant, the lowest since 1999, the firm said, calling the drop “astounding.” Price Edwards defines bulk warehouse space as investment-grade multitenant buildings for lease 35,000 square feet and bigger with ceiling heights 24 feet or higher.
Expect no speculative building boom, although a few medium-sized warehouses are under way, said Price Edwards broker Bob Puckett. Large national tenants are trending toward shorter-term leases, which keeps space more flexible by definition and “weakens the prospects of large-scale development,” Puckett said.
Demand for space was part of it — from national and local tenants expanding with the plodding national economic recovery, as well as local and regional energy-related companies — but most of the space was absorbed with one transaction in May.
Hobby Lobby buys
Hobby Lobby bought three big multitenant warehouses totaling 465,000 square feet just north of its headquarters at SW 44 and Council Road. Hobby Lobby in converting them to its own use, removing them from the leasable property rolls.
Hobby Lobby paid a combined $14,647,500 for the 1970s-era properties, or $31.50 per square foot. The buildings are at 7900 SW 34, 180,000 square feet, built in 1979; also 7738 SW 34, 142,500 square feet, built in 1973; and 7815 Gemini Blvd., 142,500 square feet, built in 1973. The seller was Thackaray Partners of Dallas. Broker John Lenochan of CB Richard Ellis-Oklahoma handled the warehouse sales.
With sale prices and lease rates for existing buildings remaining less than the cost of construction, oil-and-gas service companies are picking off small single-tenant buildings and larger companies are buying multitenant buildings for their own use, sending users off to find new space. In any case, the space is removed from the leasing market.
Not the 1980s
A few old hands in commercial real estate are quietly remembering the joys of the last energy-related property boom, in the 1980s, which lasted right up to the bust. Puckett said he is not one of them.