Dayton Industrial Market on the Rise
The Dayton industrial market kicked the year off with incredibly strong market activity, setting the stage for a competitive year ahead. The market recorded positive net absorption for the quarter which came out to be 1.97 million square feet. The last time the market saw positive absorption come close to being this high, was the first quarter of 2015. In addition, the vacancy rate fell to 3.7% and the overall average asking rate rose to $4.58 per square foot. Also, new deliveries surpassed the previous quarter with 1.2 million square feet of new supply being delivered to the market. Short supply and increased demand can be expected for the year ahead.
Dayton’s unique position as a strategic logistics hub has been the catalyst to unprecedented growth. With multiple major infrastructure systems located within miles of each other, it should be of no surprise that the local industrial market has taken off. Positive quarterly net absorption toped out at 1.97 million square feet which is unheard of for the market. The North submarket lead the charge with over 870,000 square feet being absorbed. Crocs was primarily responsible for this after taking occupancy of over 700,000 square feet of new supply. The South and East submarkets followed suit with strong activity during the quarter as well. Net absorption came out to be 510.9 and 348.7 thousand square feet for each submarket, respectively.
In addition, a decline in vacancy was the result of robust activity and decreasing supply. The vacancy rate fell by 110 basis point to 3.7%. The lowest rate that the Dayton market has seen in recent history. As more companies take notice of Dayton’s prime location for logistics related activity, available supply will continue to decrease. New construction deliveries will aid in releasing some of the pressure as 3.09 million square feet of space is set to deliver by the end of the year. However, much of the space within larger developments has already been claimed. NorthPoint is currently developing an 870 thousand square foot distribution center for Gabe’s. Additionally, Express has pre-leased 70 thousand square feet within Crossroads Logistics Park, Building A. Amazon is awaiting delivery of a 117.6 thousand square foot distribution facility for their last mile fulfillment operations. Competition for space is increasing and will likely lead to major supply shortages within the market.
Furthermore, the first quarter saw a significant amount of construction activity within the market. Space under construction totaled 3.2 million square feet. As supply shortages creep up on the market and vacancy rates experience downward pressure, construction activity is poised to increase. Completions for the remainder of the year are forecasted to exceed 3.09 million square feet. Likely easing the pressure during the last two quarters. However, participants are set to experience stiff competition for space well into 2023.
With ever increasing demand and supply shortages, rental rates have been on the rise. The overall asking rate for the market has increased to $4.58 from $4.50. The upper valley submarket saw the largest increase as asking rates went from $4.10 during the previous quarter, to $4.61. Moreover, the South submarket leads with the highest average asking rate of $5.32. Demand has been high within the South submarket as over half a million square feet was absorbed and vacancy fell by nearly 50%.
Overall, the Dayton industrial market is on the rise. Looking back through recent history, the market hasn’t experienced demand as high as it was during the first quarter of 2022. Record high construction activity and interest shown by some of the largest companies, has positioned the market for strong growth in 2022. Some of the largest buildings within the market are being constructed to satisfy the demand. Amazon currently has over 700 thousand square feet of space under constriction for their fulfillment and distribution operations within the region. Gabe’s is also planning to move in to over 800 thousand square feet of space before the year ends. Dayton’s potential as a logistics hub is setting the tone for an overly active year ahead.