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Regal Beloit sale tops 4Q moves

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No commercial property move in fourth quarter was bigger than the December sale of the 325,000-square-foot former Regal Beloit plant to SRC Holdings Corp. subsidiary Southwest Missouri Investments Inc.

“We didn’t have 1 square foot of extra space in all of our companies,” said SRC Holdings CEO Jack Stack. “We couldn’t take on any more business.”

The move influenced the industrial vacancy rate drop to 4.1 percent in the quarter from 5.6 percent in the third quarter, according to the most recent Xceligent Market Trends report. Vacancies in the industrial sector had climbed throughout the year after finishing fourth-quarter 2014 at 3.9 percent.

Industrial absorption
SRC’s Dec. 21 purchase was triggered by a late-year contract extension with automotive-engine manufacturer Navistar International Corp. (NYSE: NAV). The new work requires a 160,000-square-foot core-processing center and should create 40-50 jobs, Stack said.

“When that was penned in December, we then executed the acquisition of the Regal Beloit building with the idea that would allow us to have three to five years of additional growth,” he said, noting SRC considered constructing a 100,000-square-foot building in northeast Springfield at the corner of Mulroy Road and Kearney Street.

Terms of the purchase were not disclosed.

The building had been listed by Dave Murray of R.B. Murray Co. for $11 million.

He said subsidiaries SRC Electrical LLC, SRC Electronics, Global Recovery Corp. and The Great Game of Business each will have a presence at 2401 E. Sunshine St., which Stack calls the SRC Technologies building. Stack said the new core-processing center would be developed at 2065 E. Pythian St., which Global Recovery will vacate. Renovations and occupancy are expected to continue through Oct. 1.

Coupled with the 110,658-square-foot lease signed by Undercover Products at the former Solo Cup building on North Glenstone Avenue, Xceligent reports 462,000 square feet of positive absorption in the quarter. Absorption refers to the change in occupied space, expressed in square feet.

The average lease rates in the industrial sector declined to $3.75 per square foot from $3.98 in the same quarter last year.

Offices filling up
The area office vacancy rate is falling, according to the report, and settled at 6.9 percent in the fourth quarter, down from 9.5 percent in fourth-quarter 2014.

Meanwhile, the average office lease rates dipped to $14.70 per square foot from $15.19 per square foot in the same period the year before.

“The office market, as a whole, has been the slowest recovering of the sectors, but I think the continued absorption is going to be fairly moderate,” said Mark Harrell, a broker with Plaza Realty & Management Services LLC. “It seems we take a couple of steps forward and then take a step back.”

Earlier this month, UnitedHealthcare announced it would vacate 50,000 square feet at 1930 W. Bennett St. in July, ahead of its lease expiration Aug. 31.

Harrell leases one of the larger office buildings in the city, Hammons Tower, which is a steady 73 percent occupied.

The largest office move during the fourth quarter was Branson Retail Investments LLC’s purchase of the 50,000-square-foot Courtyard Office Center, which has since been demolished. Developer Scott Tillman, who was listed on a city building permit as the property owner, declined to disclose plans for the 1031 E. Battlefield Road property.

Retail signs
Retail vacancies in the fourth quarter inched down to 4.9 percent from 5.2 percent in the same period last year, while average asking lease rates increased to $10.18 per square foot from $9.10 per square foot.

Commercial broker Joe Costello said with more consumers turning to online shopping over the holidays, it’s an encouraging sign the retail sector has weathered the storm. Over Thanksgiving weekend, 102 million people shopped in stores and 103 million shopped online, according to the National Retail Federation.

Still, Costello said location reigns supreme. “The really good locations are doing well, and the marginal locations are not,” he said.

Across Springfield, according to Xceligent, the southeast section of the city reported the most growth in lease rates, climbing to $14.86 per square foot by the end of the year from $10.76 a year ago. Second was northwest Springfield, which moved to $13.63 per square foot from $10.46. Rogersville posted the lowest average lease rate in the Xceligent report at $7 per square foot, followed by Springfield’s central-business district averaging $7.16.

“There’s not anybody right now out there building speculative space,” Costello said, noting developers are waiting on average prices to climb even more. “The really good stuff has been rented and has stayed rented.

“The stuff being rented right now is build-to-suit. It’s Walgreens and CVS and Menards.”   

The largest transaction in the sector during the most recent quarter, according to Xceligent, was the purchase of the former Balboa Bed Co. store at 220 W. Battlefield Road by the Maurice M. Slayden Trust. The roughly 8,000-square-foot property had been listed for $975,000.

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