Article submitted by Ryan Eaton, Commercial Sales and Leasing Agent for Saurage Rotenberg Commercial Real Estate

Written by Julie Satow Published: September 13, 2011 The New York Times

Developers and investors are starting to make big bets on industrial real estate, following signs that consumers may be starting to spend again. Sales of such properties have jumped nearly threefold from last year, according to figures from commercial real estate companies, and the vacancy rate has fallen for three consecutive quarters.

The industrial market is often a leading indicator for commercial real estate, improving before the office market. This is because when companies begin seeing increased demand from consumers their first steps are to increase production and ramp up inventory. “Only then do they hire new employees and look to grow their offices,” said Robert C. Kossar, a managing director and the head of the industrial real estate group for New York and New Jersey at Jones Lang LaSalle.

Signs of the market’s growth are apparent in the New York metro area. On a brownfield site in Edison, N.J., the J. G. Petrucci Company is building a 570,000-square-foot warehouse even though the developer has not lined up a single tenant. It is one of the first industrial properties built on spec in New Jersey since the recession.

“The timing is right because while rents are still low, there are clear signs that the market is tightening,” said James G. Petrucci, the company’s president. “I am confident that there will be any number of companies wanting this space by the time it is completed.”

In the first half of this year, the vacancy rate declined to 9.7 percent, its third quarterly decline and its lowest level since the first quarter of 2009, according to Cushman & Wakefield. During the same period, a total of 70 million square feet traded hands, an increase of nearly 160 percent, the brokerage firm said. And year-to-date, leasing activity has risen more than 27 percent to 205 million square feet, compared with the same period last year, the company’s research showed.

“If you look at the fundamentals over the past six months or so, there is very strong leasing, declining vacancies and positive net absorption,” said Tim Wang, a senior vice president at Clarion Partners, which last month purchased 2.8 million square feet in industrial properties from Prologis Inc. for $118 million and is looking for other acquisitions. In addition, “industrial properties are very simple to operate,” Mr. Wang said. Even large buildings typically have only one or two tenants; they are less capital-intensive because landlords do not offer tenant improvement allowances or other terms common in office leases; and the cash flow from the rent is mostly stable and predictable.

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Ryan Eaton joined Saurage Rotenberg Commercial Real Estate in 2011.  Ryan is a graduate of Lee High School and Louisiana State Universtiy (LSU) where he earned a Bachelor of Arts degree with concentrations in business, sociology and speech communication.  Ryan’s professional memberships include the Greater Baton Rouge Association of REALTORS® Commercial Investment DivisionLouisiana Commercial Database (LACDB). He is also a member of the Baton Rouge Advocates for Safe Streets (BRASS). 

Saurage Rotenberg Commercial Real Estate is a member of the Baton Rouge Area Chamber of Commerce (BRAC); the West Baton Rouge Chamber of Commerce; the Baton Rouge Growth Coalition; the Baton Rouge Better Business Bureau; the Louisiana Commercial Data Base (LACDB); and the International Council of Shopping Centers (ICSC). Several agents, on an individual basis, are members of the Society of Industrial and Office Realtors® (SIOR), the Certified Commercial Investment Member Institute (CCIM); the National Association of REALTORS® (NAR); and the Greater Baton Rouge Association of REALTORS® Commercial Investment Division (CID).