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The Journal Gazette

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Thursday, February 07, 2019 1:00 am

Open space at record low

4.01% industrial vacancy rate in area lowest in 16 years

SHERRY SLATER | The Journal Gazette

Business is booming in the region.

Northeast Indiana's industrial vacancy rate of 4.01 percent is the lowest since The Zacher Co. started keeping statistics 16 years ago, the local commercial real estate firm plans to announce today.

The record low, recorded as of Jan. 1, was based on 109 million square feet of industrial inventory in 10 counties. The market survey's area comprises Adams, Allen, DeKalb, Huntington, LaGrange, Noble, Steuben, Wabash, Wells and Whitley counties.

Compared with January 2018, an additional 3 million square feet of factory and warehouse space was occupied last month. That drove the vacancy rate down to 4.01 percent from 4.66 percent the prior year.

The decline translates to a 14 percent vacancy rate improvement for the year.

Steve Zacher, president and managing broker of the local firm, doesn't think a relative lack of empty industrial space will inhabit growth in the region, however.

The market study found five shell buildings – four under construction and one planned – that are being built on speculation by firms willing to finish them to a tenant's specifications, he said.

“So I think we've seen the market already respond to that” shortage, he said. “In some cases, putting the building there got the user to come.”

Zacher cited German auto parts manufacturer ElringKlinger as an example. In February 2018, the company announced plans for a $23 million expansion in Fort Wayne and creation of 120 jobs.

The facility will operate in a 60,000-square-foot “spec” building constructed in 2016 but not finished inside until last year, after the lease was signed.

Such shell buildings offer flexibility not found in previously occupied warehouses and factories. Among the factors that might make a building largely unsuitable for use are low ceilings and inefficient layouts, he added.

Since the surveys began, the region's highest industrial vacancy rate was 12.21 percent in 2010. Since then, the vacancy rate has trended downward despite slight hiccups in 2013 and 2015.

The Zacher Co. also compiles annual office and retail market surveys but limits their areas to Fort Wayne.

Total industrial inventory reported for the year-end 2018 review includes almost 2.5 million square feet of new construction.

Zacher included projects that had advanced to the structural steel stage of construction by the end of last year. So projects such as Sweetwater Sound's more than $76 million, 350,000-square-foot warehouse expansion are counted even though they aren't yet operational.

About 45 percent of northeast Indiana's industrial space is in Allen County.

The remaining 55 percent is spread throughout the remaining nine counties in the survey area.

Last year's 10 largest transactions – measured by square footage – were all in Fort Wayne.