Are You Just Kicking the Can?

Are You Just Kicking the Can?

Industrial vacancy in the Mid- Counties fell again in the first quarter of 2014. Just X% of the space stood vacant at the end of March. While the strong demand indicates optimism amongst area business owners, the lack of quality facilities available for expansion could force some businesses into space that does not fully meet their needs.

Not long ago, vacancy was in double digits and owners of empty buildings were bending over backwards to attract rent-paying business to their properties. Moving allowances, signing bonuses, free rent and generous allowances for interior improvements were commonplace. Not so now, as rents have risen, free rent is disappearing and owners are emboldened to offer their properties to the highest bidder, as is-where is.

So, how did this happen, and how did it happen so fast? There are three main reasons: First, the overall economy has improved enough for businesses to take expansion plans off the shelf. Second, the availability of financing for owner/users at fixed rates under 5%. Third, the lack of new product being developed to meet the increase in demand. Combined, these three elements present a significant challenge. Unable to find good quality space that meets their needs, business owners are being forced into less efficient space or to expand piecemeal on a short term basis. This amounts to kicking the can down the road, but the situation is expected to get worse before it gets better. Prospects to develop new projects in a market, already near full build-out, are not good. Surrounding markets have been similarly impacted for the same reasons, further restricting choice. So, if your business has even the remotest plans to make a move, start looking as soon as possible. You will need to be fully informed so that you can make the best decision possible under difficult circumstances.

If you choose to purchase your own facility rather than lease it, you’ll face an even bigger challenge, as almost all the vacancy is concentrated in buildings offered for lease only. Prices for buildings offered for sale have risen dramatically as a result of their scarcity, but users are snapping them up anyway because the favorable financing through the SBA makes owning less expensive than leasing, even before considering the additional tax benefits of ownership.

If you want to optimize your next move, it’s time for you to get up to speed on how market conditions are going to impact your long term decision making. I have the tools, resources and market knowledge to assist you in that effort. My recent experience representing clients looking for space has taught me that getting out there early is the key to a good result. Don’t be one of those who is forced to settle for something less.

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