Most areas show rise in commercial real estate

By Scott Moyers

Special to Business Today

In Southeast Missouri, dozens of industrial buildings stand empty, abandoned by manufacturers in an era of downsizing, recession and enticing foreign markets.

In fact, there is almost 1.5 million square feet of available warehouse and industrial space from Cape Girardeau to Sikeston, according to an informal study by Cape Girardeau commercial broker Tom Kelsey.

"It's really at the highest level I've seen," said Kelsey, president of Lorimont Place, which has a large listing of industrial property on the market. "It's a trend everywhere. Everybody's got a lot of industrial property for a lot of different reasons."

National commercial real estate trade journals show that most areas are experiencing a record number of properties in their markets. Plant closings, downsizing, overbuilding and manufacturers turning to foreign countries to make their goods all contributed to the current situation.

Locally, industrial and warehouse properties range in size from just a few thousand feet to the largest regional available property in Sikeston, the 481,000-square-foot building that use to be the Malone and Hyde distribution warehouse.

In Cape Girardeau, there's the old Ralph Edward's Sportswear manufacturing facility, listed at more than 104,800 square feet. In Scott City, there's the Supervalu building, which offers 260,040 square feet and more than 40 loading docks. In Sikeston, there's the former site of National Lock Co., and its 106,500 square feet of industrial space. The list goes on

Two sides of the coin

Mitch Robinson, who heads the Cape Girardeau Area Industrial Recruitment Association, said there are two sides of the coin.

"On one side, it's always distressing to a community when a company closes their operations," Robinson said. "Those people working for a company are impacted in a very negative way. They've lost their jobs, maybe have to be retrained, maybe even have to move to find a new job. It's never an easy thing."

On the other hand, the buildings present an opportunity for bringing new industry and new jobs to the area, Robinson said. That provides a boost to the economy in the money spent by the newly employed as well as the taxes as well as a jolt to the tax base.

Having available space with usable buildings is obviously a good recruiting tool, Robinson said.

"When companies are out looking to expand or relocate, the first thing they're looking for is an available building," he said. "If there is a building that suits their needs, speed is very important. They can move right into a building with a minimum amount of downtime and at a much lower cost than building their own."

Robinson said that considering that there are industrial properties available all over the country, having a good area is also important.

"They won't just come for a building," he said. "You've got to have good transportation, a strong employee base and things like that, too. But often, finding a good, marketable building is the first place a company will start. These buildings drive the search."

Ready for rebound

Most experts predict that commercial and industrial real estate is readying for a rebound in 2003. Susan Hudson-Wilson is the chief executive officer at Property and Portfolio Research, an independent group that provides real estate research and strategy to the real estate community.

Hudson-Wilson said the improving economy will lead to an eventual upturn in industrial and commercial real estate, which typically lags behind changes in overall economic activity.

Unemployment is peaking now at 6.0 percent, consumer confidence is improving, inflation is low and productivity is high, Hudson-Wilson said.

"Job growth is sputtering, but it should be recovering over the next several months," she said.

The reviving economy bodes well for real estate sectors across the country, with most of the gains expected next year. Given the lag in the commercial sector, preliminary data for the first quarter shows that demand for office, warehouse and retail space was once again flat to declining.

Sales rising

But in the industrial property market, space has been increasing but sales have been rising faster, Hudson-Wilson said. Warehouse vacancy rates rose from 7.1 percent a year ago to 9.2 percent today, the highest since 1994. However, she said, the supply is starting to slow, and there are more buyers of industrial properties than sellers.

That's a sentiment that Kelsey agrees with.

"We have activity," he said. "We have a pending sales on several buildings. We have prospects on others and have shown Supervalu five or six times since the first of the year."

Kelsey said brokers like himself also assist in industrial recruitment when interested businesses call looking for property.

"They'll call and say, 'What do you have in the 200,000- to 300,000-square-foot range?'" Kelsey said. "I tell them, 'I'm glad you ask, and let me send you a list.'" Kelsey said some may choose to accentuate the negative, but he sees the abundance of industrial space as an opportunity.

"In a lot of ways it's positive," he said. "It's a buyer's market, and we do have the space should they come calling."

Scott Moyers is business editor at the Southeast Missourian.