Activity Remains Steady as New Construction Approaches Completion
After many years of being a forgotten market regarding the speculative building space, Dayton has come into its own. At the close of Q3, Dayton’s industrial market appears to remain on track for a near-record year, adding more positive absorption. While no new supply became available in Q3—leading to a misleading drop in absorption between Q2 and Q3—4.2 million SF remains under construction. This short-term lack of supply also played a role in the market’s vacancy rate dropping to a historic 3.3%, down 40 basis points from Q2. Meanwhile, the average rental rate increased to $4.65/SF, which is a 1.3% bump from Q2 and a 16.8% increase year-over-year.
While absorption saw a 71.7% decrease from Q2 to Q3 and a 65.4% decrease year-over-year, these numbers are not at all indicative of the current Dayton industrial market—quite the opposite, in fact. To date in 2022, only one speculative building has been completed in Dayton: OPUS’s 213,000 SF Crossroads I-70/I-75 Logistics Center. A noteworthy 4.2 million is still under construction, with 3.9 million slated to be completed by year’s end, though impeding winter weather is sure to cause some delays in completion time. Absorption is currently at approximately 3.8 million SF, and with the completion of these speculative buildings, the market will most likely surpass 4 million SF in positive net absorption— the highest we have seen in the last five years.
Corporations are noticing the strength of the region, as well, kickstarting with Intel’s $20 billion investment in a semiconductor manufacturing plant in Licking County, just a short drive from Dayton. Just a few months later, SEMCORP announced Sidney as its destination to establish a manufacturing facility to produce separator film, a key component in batteries for electric vehicles. Likewise, Honda announced a $4.4 billion electric vehicle battery plant will be constructed in Fayette County. During the announcement, Honda executives further emphasized the corporation’s commitment to building up its presence in Ohio. It appears that each announcement is another step towards the Dayton region becoming an established and desirable manufacturing hub.
Overall, the Dayton industrial market remains strong, with no indications of slowing. While the availability of pending construction has temporarily stalled absorption, all signs point towards continued growth.