Land Sales Slow: Large Northeast Ohio land sales have been fairly slow over the last few years, until recently. In fact, according to the commercial real estate database CoStar there were just 36 commercial or industrial land sale transactions of 50 or more acres in the Cleveland-Akron-Canton market from 2013 to 2016. That is 9 sales per year in that four-year span.
Land Prices Stagnant Until Recently: Sale prices of land were also stagnant during that time period, as the average price per acre for that group of 36 transactions (where the final sale price was reported) was $10,099.00/acre.
Land is Hot Again: In comparison, for this year alone through November 13, 2017, 22 commercial or industrial land sale transactions of 50 or more acres have closed. That number would measure over 60 percent of the number of transactions from the previous four years, but within just over an 11 months' timeframe. What is more telling, however, is that the average per acre for these transactions, where reported, was $23,131.00/acre; more than double the average from 2013-2016. Land has become 'hot' again.
Low Vacancy Leads to Construction: A significant reason for this trend is that low vacancy rates, especially in the industrial sector, have spurred construction, which typically follows large land sales. As of Third Quarter 2017, industrial vacancy dipped to 6.4%, a new record low for the market, a market that has contracted by nearly 4.0% since Third Quarter 2012, where vacancy sat at 10.3%. As a result, construction in the Northeast Ohio market has been strong. In 2017 alone, nearly 133,000 square feet of industrial space has delivered; and 707,000 square feet is currently under construction. Those numbers don't even include industrial facilities that were constructed by owner/users. Development is hitting record highs nationally, as well, as National Real Estate Investor recently reported that approximately 277 million square feet of industrial spaces is currently under construction in the United States. While Cleveland's industrial sector might be tight, Newmark Knight Frank reported in the third quarter that the national industrial average vacancy is 5.5%.
Few Large Land Parcels: One major obstacle that Northeast Ohio faces is that there are very few 50-plus acres of contiguous land parcels that are available. As of November 13, CoStar listed approximately 139 for sale records for commercial or industrial land throughout the entire Cleveland-Akron-Canton region. Of those 139, only 33 are within a 20-mile radius of Cleveland.
Amazon Nabs Vacant Mall Sites: In fact, Amazon had to acquire former mall sites in Euclid and North Randall to accomplish their goal of building facilities near where people live. Once Amazon's North Randall facility is up and running and when the Euclid project comes to fruition as an Amazon fulfillment center, the company will occupy nearly 2 million square feet of Northeast Ohio real estate; and they've just begun.
Two Takeaways/Trends - One trend resulting in this activity is that land prices will continue to climb. - A second takeaway is that the demolition of existing buildings will become a legitimate alternative for industrial developers to commence the new construction of industrial parks, large manufacturing facilities and giant fulfillment centers (our very own CornerStone Industrial Park was at the forefront of this trend). Stay tuned for Part 2 of this blog, which will focus on 10-20 acre industrial land parcels in Greater Cleveland.