HEARTLAND SNAPSHOT, JANUARY 2006

Cincinnati Industrial Market

Cincinnati's industrial market enjoyed good third- and fourth-quarter activity in 2005. Low interest rates and rental rates have attracted tenants that are eager to take advantage of the opportunities before the rates go up. “The greater Cincinnati industrial market has performed well,” says Jeff Wolf, an industrial sales associate with The Everest Group of Cincinnati. “Activity is down but deals are still being made. The transaction time is a little slower, but tenants are on the move to find space for their business operation before interest rates increase further.”

In the third quarter of 2005, positive absorption measured approximately 2.42 million square feet. This led to a decrease in vacancy to 6.9 percent, down from the second quarter rate of 7.7 percent. The vacancy rate for flex space stood at 13 percent at the close of third quarter 2005.

The tenants that are making the most moves are in the distribution and warehouse segments, but most landlords are trying to attract high tech and light manufacturing tenants, Wolf says. The rental rates for available industrial space range from $3.15 to $3.65 per square foot for traditional space and from $4.95 to $5.50 per square foot in the flex market.

“Most of the industrial development is taking place in the Butler County and Northern Kentucky Airport markets,” Wolf says. “The access to highways and airports, along with newer developments that offer tax incentives have made these areas most attractive.” These two growing markets are using new product and aggressive tax incentives to create new job opportunities in the market.

Other areas currently experiencing industrial growth include the Butler County, West Chester and Fairfield, Ohio, submarkets. According to Wolf, First Industrial Realty Trust recently increased its stake in the market by acquiring a majority of Duke Realty's industrial and flex properties located in the greater Cincinnati area.

With user activity continuing at a steady pace and a solid pipeline of new development, the greater Cincinnati area industrial market is expected to continue growing throughout the year.

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