THIS DEAL SHOWS HOW BLAZING HOT BALTIMORE’S INDUSTRIAL MARKET HAS

Baltimore, MD, September 29, 2014:  Industrial Income Trust has acquired a Savage warehouse for double the price its owner paid for it four years ago, a sale CBRE Group Inc. said highlights how difficult it is to find industrial investment opportunities.

Industrial Income Trust paid $9.9 million for the Class B warehouse, which was purchased by Atapco Properties Inc. for $4.5 million in 2010. Located at 8730 Greenwood Place and built in 1985, CBRE broker Bo Cashman said the 121,500-square-foot warehouse had undergone some improvements under Atapco’s ownership, but the real draw was the availability of a building in an increasingly tight market.

“If we took this out to market 12 months ago, I don’t know if we would have done very well at all compared to what we’re seeing now,” Cashman said. “What we’ve seen in just the last 45 to 60 days is that there continues to be less product on the market, but we keep seeing new capital coming in.”

That capital is coming from investors who are taking the long view when it comes to acquiring industrial property in the mid-Atlantic, Cashman said. They may have to pay big to acquire industrial real estate now, but those properties will likely be in high demand as companies seek to find strategic locations for distribution near the Port of Baltimore and the Baltimore-Washington region’s massive population.

“What we do hear consistently is that here in the mid-Atlantic, between the D.C. metro and Baltimore metro, we have 8.5 million people,” Cashman said. “This is a population that needs to be serviced and they need warehouses to do that. Not necessarily the big box, but more of the day-to-day industrial users that really want to be here for access to the Washington and Baltimore beltways.”

What’s changed the most, however, is investors’ willingness to acquire warehouses at what’s called a low yield. That means the buyer is not likely to realize much of a return on investment — at least in the short term — due to the high cost of the property. The Savage warehouse Cashman sold traded at more than $81 per square foot.

“From a yield standpoint, we haven’t seen this low a yield in Class B in the last 10 years,” Cashman said of the warehouse, which is split between four tenants under long-term leases. “Where investors get hurt is when they buy at a high price per square foot and someone next door starts building a brand-new building and take their tenants. But there’s not a lot of industrial that’s under construction, and the majority is pre-leased. So investors are more comfortable” buying existing warehouses.

In Harford County, industrial vacancy has fallen to about 2 percent — the lowest in recent memory — and some large warehouse developers are signing leases with tenants even before they get under construction.

Amazon.com Inc.’s 1 million-square-foot warehouse has spurred plenty of optimism for the future of distribution in the region as well, as the company’s choice of the former General Motors plant site on Broening Highway site in Baltimore has further underscored the value of land in a region that has little availability for new construction.

Baltimore Business Journal, Kevin Litten. Retrieved September 29, 2014 from: http://www.bizjournals.com/baltimore/blog/real-estate/2014/09/this-deal-shows-how-blazing-hot-baltimores.html