Story by IPB Industrial
February 15, 2023
By Nicole Mistretta – Data Reporter, Dayton Business Journal
Demand for industrial property remains extremely high in the Dayton region. But a lacking supply of property for sale and slowly accumulating availability of exorbitantly priced properties available for lease spells trouble for local companies.
Industrial Property Brokers Principal Tim Echemann said rates in the region are reaching a height he has never seen since his career in Dayton began in 1989.
“Warehousing rates in the Dayton region have never been this high. I’ve been working this area since 1989,” Echemann said. “Rates have gone up around 2% a year, but in the last two/three years, they’re gone up 8% to 10% a year. I don’t know if they’re going to level off or not, but a lot of times they don’t go down unless you get a big supply and that would happen in a recession.”
Ohio is seeing increased demand as an undervalued state, but the Dayton region has become a treasure trove of affordable property to corporate giants, Echemann said. While companies used to stay in “safe” markets like Cincinnati and Columbus, the appeal of tertiary markets like Dayton, Piqua, Sidney and even further from the Interstate are on the rise.
“People are buying everything they can get their hands on,” Echemann said.
While the demand is bringing more to the region, Echemann believes it is to the detriment of local companies who can’t compete with the wallet of out-of-state companies who can afford to pay the high square footage rates – hitting from about $4 a square foot to upwards of $7 in some cases.
“Third party logistics companies are gobbling up in order industrial space, and their clients are these big factories, these Chrysler’s and Honda’s who can pay big money,” Echemann said. “As far as the local guys, it’s got to be tough for them to get this space and afford it.”
In recent weeks, Echemann said industrial leasing space is coming back online, but the supply of buildings for sale is extremely thin. Despite the high demand, the industrial sector may not see a plethora of new construction for the foreseeable future.
Echemann said banks have been refusing to finance spec warehouse construction without an established tenant base. So while a fair share of leasable buildings are coming online in the market this spring, nothing new is set to follow.
“A lot of people had a lot of land under contract, they were hoping to have spec buildings go up on, and they lost the ground,” Echemann said. “They had to give up the money they put down on it.”
Continued interest in the state despite tight availability is a matter of Ohio’s policies establishing a solid foundation for businesses and the ability to reach 80% of the population within a two-day drive.
“That’s a huge reason we’re getting all the logistics firms here,” Echemann said. “And the reason they’re coming to Dayton is because Columbus is already expensive, and Cincinnati got expensive – now they’re coming to Dayton where we have a lot of inexpensive land that’s ready to be built on.”
As industrial takes the cake with increasing demand, retail demand also is gaining traction. However, Echemann said office is lingering behind with little sign of recovery.
“The demand for office space is very low and I’m not sure when it’s going to come back,” Echemann said. “There’s nobody in offices.”
Echemann suspects more offices will eventually fall into mixed-use, turning higher floors into residential space to help fill vacancies, also aiding the local housing gap.
See DBJ’s recent coverage for a full dive into the office market.
The firm leases and sells commercial property in Ohio, Indiana and Michigan. Headquartered at 2490 Landman Mill Road in Piqua with a staff of six, it also provides property management services in Ohio.
80% of the company’s local property managed is industrial with 10% in office and retail respectively. The company manages 200,000 square feet of commercial space with their largest properties in Covington (72,000 SF) and Sidney (60,000 SF).
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