What do Cincinnati, Indianapolis, Kansas City, Memphis and St. Louis have in common? These are the Midwest industrial markets that Colliers International has pegged as some of the most important ones in 2018.
The five cities made appearances on the Top 10 Emerging U.S. Industrial Markets to Watch in 2018 report compiled by Colliers. That’s pretty impressive. Half of this year’s list is made up of Midwest cities.
What makes these industrial markets ones to watch this year? Consider Cincinnati. Colliers says that this market has become a key destination for e-commerce users because of its central location, large workforce and strong transportation options. Colliers also points out that more than 35 million people live within 250 miles of Cincinnati, and nearly 20 percent of these are in the hightly sought-after Millennial demographic.
The demand from e-commerce companies has helped bring the market’s industrial vacancy rate to 4.2 percent, the lowest it has been in a decade.
“E-commerce as rapidly emerged as the number-one driver,” said John Gartner, senior vice president and principal with Colliers’ Cincinnati office in a written statement. “The increased interest in our thriving economy has brought numerous new developers to our market, providing the speculative product that has attracted many new companies.”
Cincinnati benefits, too, from the Amazon Prime Air Hub. This $1.5 billion investment on more than 900 acres at the greater Cincinnati/Northern Kentucky International Airport has produced a steady stream of activity.
Colliers had plenty of positives to share about the Indianapolis industrial market, too. In 2017, this market recorded positive net absorption of 7.5 million square feet, the second-highest annual absorption total that the Indianapolis area had seen in 10 years.
Developers remained busy here, too. Colliers reported that the Indianapolis industrial market saw 8.5 million square feet of new construction last year. That is the most ever in one year here.
“Indiana continues to earn top marks for its appealing tax structure and business-friendly regulatory environment,” said Brian Zurawski, executive vice president and co-market leader for the Indianapolis Colliers office. “Because of this, Indianapolis continued to post robust fundamentals in 2017 and is competing with all markets as the go-to regional distribution market of the Midwest.”
Kansas City remains similarly busy, with Colliers reporting that this market saw 8.8 million square feet of new industrial construction in 2017. That, too, is a record.
Colliers says that Kansas City is one of the most logistics-friendly industrial markets in the country, as its ground, air and rail offerings rival all other markets in the United States. The Logistics Park Kansas City development continued to grow in 2017 and attract tenants at a quick pace. This park is served by the BNSF Railway, so is an attractive destination for industrial users.
Currently, there are more than 7 million square feet of new distribution facilities at Logistics Park Kansas City, with speculative and build-to-suit opportunities available for new users.
A strong transportation network helps Memphis, too, according to Colliers. The CRE company pointed to the five class-one railroads and 490 trucking terminals that serve the market. The International Port of Memphis is the second-largest inland port on the shallow draft portion of the Missippi River and the fifth-largest inland port in the United States. This port is a key industrial tool, feeding product to Memphis’ large rail network.
In what might come as a surprise to many, Memphis actually ranks as the third-largest rail center in the United States, behind only Chicago and St. Louis. The market is home to nine fully operational rail yards with a total container capacity of more than 2 million annual lifts.
St. Louis is another Midwest market that Colliers cites for its robust transportation infrastructure. The Port of Metropolitan St. Louis covers 70 miles and is the northernmost ice- and lock-free port on the Mississippi River and is served by six Class-One railroads, seven interstate highways and two international airports. More than one-third of the U.S. population is located within 500 miles of this port.
The market also benefits from St. Louis Lambert International Airport, which is a growing cargo hub with total cargo volumes increasing 8.3 percent year-over-year in 2016.
“This is a great time to be an industrial real estate developer in St. Louis,” said Geoffrey Orf, senior vice president of the St. Louis chapter of Colliers International. “The market’s central location and strong rail network are contributing to strong leasing activity and net absorption, and this will continue into 2018.”