It’s a “tale of two cities,” Richard Sleasman says, describing the industrial versus office real estate markets locally.
Industrial – the warehouses and distribution facilities used by online purveyors of goods and the logistics firms that get the products from point A to point B – represents a “hot market” that got even hotter during the coronavirus pandemic, says Sleasman, president and managing director of the Albany office of national commercial real estate powerhouse CBRE.
A lot of the growth had to do with more and more people, stuck at home, shopping from home.
Office space, meanwhile, sits in limbo while companies decide when (or if) employees will return from their kitchen-table workstations.
Through June 30, the Capital Region industrial market saw a vacancy rate of just 3.5 percent, which Sleasman said is historically low and likely to edge lower in 2021.
And that will be even with the addition of 1 million square feet to the industrial space total – already spoken for by Amazon at its new distribution center in Rensselaer County – by the time CBRE-Albany completes its Dec. 30 second-half inventory count.
The phenomenon is not ours alone. Nationally, “industrial and logistics, along with certain alternative sectors like life sciences, cold storage and data centers, have thrived in the COVID era,” says a report released last month by Los Angeles-based CBRE.
The company anticipates another 250 million square feet of occupied industrial space on the U.S. market next year, “on the back of e-commerce growth.” CBRE researchers found that for every $1 billion in incremental online sales, demand for warehouse space increases by 1.25 million square feet.
Such demand will lead to new construction – already at near-record levels – and new design features both in space configuration and technology integration. Power requirements also will be greater “for machinery, robotics and other picking-and-sorting” functions, according to the report.
While speculative and build-to-suit construction will respond to the demand nationally, locally we’re more apt to turn to the latter, Sleasman said.
Since less outside investment is seen in the Capital Region, less speculative building occurs. But Rotterdam-based Galesi Group, with a proven track record, is putting up a 200,000-square-foot building without any signed leases, confident it will find a tenant or tenants, Sleasman said.
Galesi built 250,000 square feet at its Rotterdam Corporate Park this year for logistics operations by both FedEx and Home Depot, with the big-box retailer using the space for “last mile” or to-the-door delivery of online purchases.
Amazon, too, has located last-mile facilities locally this year, in Albany and Montgomery counties.
Sleasman said being “in the crosshairs” of the Northway, the Thruway and Interstate 90 makes the Capital Region attractive for warehousing, since highway proximity helps reduce one of the top three costs – transportation – for companies.
He foresees that advantage contributing, too, to industrial demand in 2021 that “will remain strong if not stronger.”
Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at [email protected]
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