HEARTLAND SNAPSHOT, NOVEMBER 2007

Columbus Industrial Market

Columbus’ industrial market is stronger than ever right now, and the city is seeing a huge influx in users looking for bulk product, which is fueling a rush of speculative development. Improvements to the Heartland Corridor rail line are expected to be complete in 2010, and will enable double-stacked containers to be transported between the Port of Virginia at Norfolk and Columbus by raising bridge and tunnel clearances in Virginia, West Virginia and Ohio.

“The most significant development is Norfolk Southern Corporation’s new 300-acre intermodal facility,” says Curt Berlin of NAI Ohio Equities. “It will feature direct access to the deep-water port of Norfolk, via the new Heartland Corridor.” 

The new facility is expected to be fully operational by early 2008, and has already spurred the planned development of more than 1,500 acres in the area.

Two submarkets that are benefiting from a good development climate are Rickenbacker and West Jefferson. Rickenbacker will continue to see speculative development in the future, with buildings ranging from 200,000 to 936,000 square feet. However, escalating land development prices may create a barrier to entry to new developers in the submarket. Needless to say, Rickenbacker Global Logistics Park has started to attract big users, with Hyperlogistics leasing 400,000 square feet at the park. West Jefferson has also seen big-box users enter the market.

“The West Jefferson market is relatively new, and is off to a quick start,” says Shane Woloshan, a senior associate with Grubb & Ellis|Adena Realty Advisors. “In 2003, Target constructed a 1.4 million-square-foot facility in West Jefferson and was the only significant user of space. In the past 2 months alone, Duke Realty Corporation has acquired land and established West Jefferson as the newest up-and-coming area.”

Duke will soon begin construction on the two build-to-suits in Park 70 at West Jefferson, a more than 800,000-square-foot facility for Restoration Hardware and a more than 1 million-square-foot facility for Kellogg’s. On the speculative side, Whirlpool has leased more than 1.2 million square feet in the past 18 months, including 624,000 square feet at 2859-2869 Rohr Road and 250,000 square feet at 4555 Creekside Parkway.

Columbus has proved to be a difficult market for new developers to break into in recent years. This is mostly due to the fact that major developers such as Duke, ProLogis, Pizzuti and Opus have controlled the vast majority of land with incentive packages for speculative development. Kirco and Cabot Properties have developed speculative product in the area, securing land positions with the necessary incentive packages.

These development incentive packages have produced an interesting split in the Columbus industrial market. Owners of newer industrial buildings, with incentives in hand, are trying to attract large distribution/warehouse users, while second-generation building owners are subdividing their buildings for smaller users to maximize rents.

“The leasing environment will remain competitive for landlords and favorable for tenants,” Berlin says. “In spite of this, there should be an increase in lease rates for new buildings due to higher steel prices and developers’ unwillingness to accept current lease rates, which will provide unacceptable returns.”

Right now, the overall vacancy rate in the market is 11.7 percent. This rate has been declining, but the completion of the 1.6 million-square-foot Delphi Manufacturing Facility, should cause an increase in the overall rate. However, it should not have an impact on continued speculative development in the area.


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