Positioning

Amazon, Gabe's among large retailers taking advantage of Dayton's strategic position as a logistics hub – The Business Journals

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Dayton’s strategic position as a logistics hub resulted in overwhelming demand for industrial product during the first quarter of 2022, according to a new report.
Colliers International, a professional services and investment management company, reported the Dayton industrial market kicked off 2022 with “incredibly strong” market activity, setting the stage for a competitive year ahead. The market recorded positive net absorption for the quarter, which came out to be 1.97 million square feet. The last time the market saw positive absorption come close to being this high was the first quarter of 2015.
In addition, the vacancy rate fell to 3.7% and the overall average asking rate rose to $4.58 per square foot. Also, new deliveries surpassed the previous quarter with 1.2 million square feet of new supply being delivered to the market. Short supply and increased demand can be expected for the year ahead, Colliers says.
“Dayton’s unique position as a strategic logistics hub has been the catalyst to unprecedented growth,” Colliers stated in its report. “With multiple major infrastructure systems located within miles of each other, it should be of no surprise that the local industrial market has taken off. Positive quarterly net absorption topped out at 1.97 million square feet, which is unheard of for the market.”
The north submarket led the charge with over 870,000 square feet being absorbed. Shoe retailer Crocs was primarily responsible, taking occupancy of over 700,000 square feet of new supply. The south and east submarkets followed suit with strong activity during the quarter. Net absorption came out to be 510,000 square feet and 348,700 square feet for each submarket, respectively
A decline in vacancy also was the result of robust activity and decreasing supply. The vacancy rate fell by 110 basis points to 3.7% — the lowest rate the Dayton market has seen in recent history. As more companies take notice of Dayton’s prime location for logistics related activity, Colliers says available supply will continue to decrease.
New construction deliveries will aid in releasing some of the pressure as 3.09 million square feet of space is set to deliver by the end of the year. However, much of the space within larger developments has already been claimed. NorthPoint Development is currently developing an 870,000-square-foot distribution center for Gabe’s in Springfield. Additionally, Express has pre-leased 70,000 within Crossroads Logistics Park, Building A. Amazon is awaiting delivery of 117,600-square-foot distribution facility for their last-mile fulfillment operations. Amazon currently has over 700,000 square feet of space under construction for its fulfillment and distribution operations within the region.
Competition for space is increasing and will likely lead to major supply shortages within the market, according to Colliers.
The first quarter also saw a significant amount of construction activity within the market. Space under construction totaled 3.2 million square feet. As supply shortages creep up on the market and vacancy rates experience downward pressure, Colliers says construction activity is poised to increase. Completions for the remainder of the year are forecasted to exceed 3.09 million square feet, which will likely ease the pressure during the last two quarters. However, participants are set to experience stiff competition for space well into 2023.
With ever-increasing demand and supply shortages, rental rates have been on the rise. The overall asking rate for the market has increased to $4.58 from $4.50. The upper valley submarket saw the largest increase, as asking rates went from $4.10 during the previous quarter to $4.61 in Q1 2022. The south submarket leads with the highest average asking rate of $5.32. Demand has been high within the south submarket as over half-a-million square feet was absorbed and vacancy fell by nearly 50%.
“Overall, the Dayton industrial market is on the rise,” Colliers states. “Looking back through recent history, the market hasn’t experienced demand as high as it was during the first quarter of 2022. Record high construction activity and interest shown by some of the largest companies has positioned the market for strong growth in 2022. Some of the largest buildings within the market are being constructed to satisfy the demand. Dayton’s potential as a logistics hub is setting the tone for an overly active year ahead.”
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