Kirk Heyle: Outlying areas still have room for improvement in the industrial sector.
Industrial vacancies continue decline in 2Q
Brian Brown
Posted online
Prime Inc.’s March 29 purchase of the 70,284-square-foot DeGraffenreid & Sons pickle plant at 2848 N. Le Compte Road helped drive down the area’s industrial vacancy rate through the first half of the year, according to commercial real estate tracker Xceligent.
The second-quarter area industrial vacancy rate landed at 5.6 percent, down from 5.9 percent in the first quarter and 6.8 percent at the end of second-quarter 2012.
The retail sector posted a 5 percent vacancy rate in the quarter ending June 30, a dip from 5.2 percent in the previous quarter and 5.3 percent from the same month last year. The office sector rate ended June at 10.5 percent, a small increase compared to the 10.3 percent rate in 2012, according to the July 22 Market Trends quarterly report covering the Springfield market, which includes Strafford, Rogersville, Ozark, Nixa, Republic and Willard.
Overall, the local numbers are more competitive than the average market nationwide. The national average for office vacancies came in at 15.7 percent, according to the report, which utilized data from the National Association of Realtors. The national retail rate was 10.5 percent in the second quarter, and industrial vacancies registered at 9.4 percent.
A pair of local commercial brokers said the most recent Xceligent report reflects an area economy on the mend. However, both indicated there is still room for improvement.
Industrial Kirk Heyle of Heyle Realtors & Consulting Services LLC, who serves as a local industrial board member for Xceligent, said he is pleased to see vacancies decreasing in the industrial sector.
“It’s warming up,” he said. “The market is trying to go in the right direction.”
Heyle, however, tempered optimism, noting there was more absorption needed in the bedroom communities surrounding Springfield.
In Republic, for example, the vacancy rate climbed slightly during the last year to 21.2 percent from 20.4 percent – giving the city the distinction of having the highest local rate, according to the report.
Also, while there has been more than 332,000 square feet absorbed in the first half of the year – with northeast Springfield and northwest Springfield accounting for more than 227,000 square feet of absorption during that time – the manufacturing vacancy rate was 12.4 percent in the second quarter.
During the second quarter, Xceligent noted a lease in Nixa by CrossFit of the Ozarks at an 18,050-square-foot facility at 2180 N. Bristol Lane among top transactions. Also of note, the purchase of the 11,644-square-foot former Baer Supply Co. property at 1825 N. Newton Ave. by Wholesale Lumber and Materials Co. helped shape the low 1.3 percent vacancy rate in the industrial subset category of wholesale/distribution properties.
Retail R.B. Murray Co. Vice President Ross Murray said absorption in the Battlefield Road retail area is a sign the local economy is making strides.
“Some of the nicer, 30,000- to 50,000-square-foot shopping centers that have had vacancies during the last couple of years are now being absorbed,” Murray said, specifically pointing to centers around Battlefield Mall.
Murray said the Fremont Shopping Center, where R.B. Murray Co. serves as manager and broker, is fully leased. He added he believes Battlefield Marketplace and Brentwood Shopping Center are full or nearly full.
In the second quarter, Murray said a national tenant signed a lease with R.B. Murray Co. to occupy the former Romano’s Macaroni Grill building at the Fremont Shopping Center.
“I can’t disclose the national tenant that signed. All I can say is that it is a Fortune 50 company,” Murray said, citing a confidentiality agreement. “Remodeling should start in the next 90 days or so.”
At the end of the second quarter, there was more than 844,000 square feet of retail space available in the market, according to Xceligent. Springfield posted the lowest vacancy rate in the area at 2.5 percent with 154,712 square feet available. Rogersville recorded the highest rate at 18.5 percent.
The report noted only one property with at least 50,000 square feet available and only three that have between 25,000 and 50,000 square feet of leasible space.
Office With vacancy rates well below national averages, Murray said commercial construction could begin to take off during the next 24 months. He pointed to the $22 million Farmers Park project on East Republic Road as an example of a local developer – Matt O’Reilly – who sees a need for additional retail and office space in the area.
“As consumer confidence continues to pick up and consumer spending has started to re-energize, you are starting to see some of that,” Murray said. “We are just reaching the point where we are seeing a little bit of demand in certain pockets of our market.”
According to the Market Trends report, Class A properties have had the most positive absorption during the first half of 2013, with more than 22,000 square feet filled.
In the area, both Rogersville and Strafford had no available office space, according to the report, while Nixa had the highest vacancy rate at 20.1 percent. Businesses in Nixa, however, are slowly filling up available office space. In the second quarter of 2012, the office vacancy rate was 26.3 percent.
Within the city, northwest Springfield posted the lowest vacancy rate at 3.9 percent, while the southeast quadrant of the city held a rate of 11.6 percent.
Heyle said the overall commercial market is improving for leasing agents and brokers, but it could be better.
“It is still slow. I don’t see us going great guns like the residential market,” Heyle said.
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