Industrial Lease Rate Discrepancies
Jun 5, 2019
Tyler Binkley, Xplor Commercial

The northeast Indiana industrial real estate market has some similarity with what has progressed across the nation over the last few years. The need for larger industrial buildings, of 50,000 ft or higher, has had a significant impact on the tenant/landlord market with little supply available.

To meet the increase in market demand, new construction and spec buildings are being erected. These buildings usually have amenities that are attractive to the latest market specification for users with higher ceilings, energy efficiency, more docks, and located closer to highways and interstates.

What is really striking about this is the price discrepancy, or gap, being seen in rent cost between existing and newly constructed industrial buildings. Due to the construction cost rise and investors needing to get a return on the higher expenses, rental rate gap is higher compared to existing industrial building rental rates. Utilizing resources available through Loopnet and CREXi, below is a study done of current industrial real estate rental rates for buildings on the market available in northeast Indiana:

As you can see from the above study, the average rent for new buildings has a gap of more than double the rent for existing buildings. However, with the need and lease trends of newer spec buildings, the market has not altered the price of existing buildings. The demand for industrial real estate is causing a continual increase in the rental rates, which will assist the existing buildings to have a continual increase of rent for what is growing as the fair market rate. With little availability and a need for industrial real estate, paying higher rent for the latest blockbuster is becoming a need that many manufacturers, distributors and warehouse users are entertaining regularly. 

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