Northwest Indiana's industrial vacancy rate has fallen so low that there's a clear market demand for new speculative buildings, or those constructed without a tenant lined up in advance, a market study found.
NAI Hiffman Commercial Real Estate reported the region's industrial vacancy rate declined to 6.23 percent in the second quarter, down from 6.28 percent in the first quarter, as businesses took over 154,000 square feet of vacant space in industrial buildings. The vacancy rate is now nearly half of the peak of 12.1 percent it had been at the end of 2009.
Sunbelt Rentals finished a 21,000-square-foot building in the Northwind Crossings business park in Hobart, and Urschel Laboratories completed its 350,000-square-foot headquarters and manufacturing plant in Chesterton. MonoSol's new water-soluble film plant in Portage will add another 300,000 square feet, and Pratt Industries and UGN Inc. are both expanding in Valparaiso.
"As available industrial has tightened in this submarket, it's anticipated that speculative construction activity is imminent," the report noted. "The current industrial base is short on supply to meet today's requirements of industrial users seeking modern facilities that offer 30-foot ceiling height, efficient loading capabilities along with ample trailer parking."
Speculative construction is already underway. Becknell Industrial is building a 160,000-square-foot shell building at NorthWind Crossings in Hobart, the first building in the region of its size to be built on speculation. Becknell COO Mark Shapland has said businesses have been looking for buildings of 100,000 square feet or more they can move right into, but none are available.
Such projects are generally considered a sign of economic health because they show that developers and their financiers are bullish about the local economy.
The Northwest Indiana market is faring somewhat better than the overall Chicago area market, where the vacancy rate stands at 7.7 percent, according to NAI Hiffman. But the market has been gaining momentum with positive net absorption of 6.6 million square feet in the second quarter and 9.8 million square feet of industrial space under construction.