The industrial market in Washington County has been on a tear over the last several years in St. George. Now that the weather is starting to cool off, here’s a quick update on the industrial market in the St. George area.
Vacancy? I need some space…
As of mid-year, our vacancy is holding steady in the 4.34% range. This is due to a few large building vacancies that comprise 75% of the vacant square footage in the market.
Of the 440,000 square feet of vacancy in Washington County, the former Viracon building comprises 237k and the former sleeping bag factory comprises 90k for a total of 337k square feet in just these two buildings!
If you take these two buildings out of the mix, that leaves you with about 100,000 square feet of vacancy out of over ten million square feet, or about 1.1%.
This is what most companies find when shopping for space. The smaller the space, the more difficult it is to find…and, the more expensive it is.
How much did you say that was?
Asking lease rates and sale prices continue to rise across the board. Average asking lease rates are up slightly year over year with the largest increases coming in the 0 – 5,000sf sector.
Weighted average asking lease rates are up only slightly about 4-5% as we have not seen much change on the larger vacant buildings which continue to hover around $0.55sf NNN.
There are several large buildings for lease on the market that are not calculated in the vacancy number as they are currently under lease. This additional inventory is also keeping the asking lease rate moderate for larger spaces.
Some of the larger spaces are getting occupied with a portion of the Viracon building a portion of the former Quality Park Products building being leased up within the past few months. Both are shorter term leases, but they are good tenants occupying space.
Here are the average asking lease rates by size. Note that there were some outliers which skewed the data a bit and it’s a fairly small sample size due to the limited number of available spaces in some of the sectors, so I combined the aggregate sectors to balance out the data better:
0 – 20,000sf: $0.74sf/mo NNN
20,000sf +: $0.56sf/mo NNN
I don’t expect lease rates to continue increasing much over the next few years, only in line with any construction cost increases that we see.
What are some of the notable projects?
Paparazzi just finished an 80,000 brand new facility off of Exit 2. They are planning another 200,000sf+ multi-story warehouse expansion expecting to break ground before the end of the year. This is a homegrown company out of Hurricane that is just killing it! They have become the largest private employer in the St. George area. They sell fashion jewelry and have done an amazing job. Congrats to Paparazzi.
Kenworth Sales Company has been located over in the Millcreek Industrial area. Travis Parry, SIOR and Tom Callister, SIOR with LINX Commercial Real Estate helped Kenworth acquire the former 27 acre visitor center from UDOT at Exit 2, Southern Parkway. They recently completed their new 20,000sf+ facility. It’s sweet and looks fantastic as you come into St. George from Las Vegas.
Henriksen Butler and Riverwood Mills have over 60,000sf of new office and industrial space that they have built for their new offices just off Dixie Drive in the Tonaquint area near the Tonaquint cemetary. The buildings are concrete tilt and look amazing. Both companies have or will relocate their operations to these new facilities.
UPS has a new 30,000sf+ facility under construction in the Fort Pierce Industrial Park. The facility will be located on a 10 acre parcel that they purchased last year. This will be a great addition to Ft. Pierce.
Beehive Industrial completed 155,000sf of spec industrial space in the Fort Pierce Industrial Park. Travis Parry, SIOR with LINX Commercial Real Estate assisted the developers in acquiring the property prior to construction. The two new concrete-tilt, multi-tenant industrial buildings were completed in 2018. Travis helped them lease up to full occupancy this summer. Tenants include Dean Foods, Teton-X, Desert Polymer, Rio Stone, Pacific Tile and others.
For more recent project announcements, check out our recent LINX update on 5 projects coming to Southern Utah.
What’s next? How do I get in the game?
We expect additional new construction to continue in the market with limited spec construction coming online over the next 12 months.
There are opportunities in the market for users, developers and tenants, but you need to plan ahead and strategically approach acquisition and construction decisions due to elevated constructions costs, labor and contractor shortage, and on and off-site improvement costs and impact fees.
We have been working with several clients across the industrial spectrum and can help you navigate the property / site selection process. Feel free to call or email me with questions.
If you or someone you know is looking to buy, sell or lease commercial real estate, call us or check out our website at linxcre.com.
Travis Parry, SIOR, CCIM
Partner – LINX Commercial Real Estate