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2020 North America Industrial Big Box Review & Outlook

Cincinnati
March 22, 2021

“Cincinnati is among the top-performing markets in the Midwest. The scarcity of readily developable industrial sites dictates a limited supply of new speculative deliveries to the market, while fostering steadily increasing rental rates and enhanced long-term building values. The diversified local economy driving industrial demand includes e-commerce, manufacturing, consumer packaging, automotive, food and 3PL fulfillment. Strong demand and development is expected to continue for years to come.”
Mike Lowe – Senior Vice President

Demographics

Cincinnati’s central location makes it an ideal market for big-box occupiers. More than 2.8 million people live within 50 miles of the market core, while 36.7 million or 14.5 million households are within 250 miles.

Figure 1: Cincinnati Population Analysis

Source: CBRE Location Intelligence.

According to CBRE Labor Analytics, the local warehouse labor force of just over 41,000 is expected to grow by 9.1% over the next decade. The average wage for a non-supervisory employee is $13.78 per hour, 2.1% lower than the national average.

Figure 2: Cincinnati Warehouse & Storage Labor Fundamentals

Source: CBRE Labor Analytics.
*Median Wage (1 year experience); Non-Supervisory Warehouse Workers (forklift, warehouse workers).

Location Incentives

Over the past five years, there have been 174 economic incentives deals totaling more than $212 million at an average of $10,000 per new job in the Cincinnati metropolitan area, according to Wavteq.

According to CBRE’s Location Incentives Group, among Ohio’s top incentive programs is the Job Creation Tax Credit (JCTC) program, which provides a refundable and performance-based tax credit that is calculated as a percent of created payroll and is applied toward a company's commercial activity tax liability. JCTC was designed to create a more competitive business climate in Ohio by incentivizing companies that are considering doing business elsewhere.

Among nearby Kentucky’s top incentive programs is the Kentucky Business Investment (KBI) Program, which provides income tax credits or payroll refunds to businesses engaged in manufacturing, agribusiness, headquarter operations, alternative fuel, renewable energy or carbon dioxide transmission pipelines.

The Kentucky Enterprise Initiative Act provides companies with a sales and use tax refund for building and construction materials that are intended to improve real property value. This refund is also available to companies for equipment used for research & development, data processing equipment or flight simulation equipment.

Figure 3: Cincinnati Top Incentive Programs

Source: CBRE Location Incentives Group.
Note: The extent, if any, of state and local offerings depends on location and scope of the operation.

Logistics Driver

Cincinnati’s air freight capabilities separate the region from other major big-box markets. The region is home to two large freight airports: Cincinnati-Northern Kentucky International Airport (CVG) and Louisville Muhammad Ali International Airport.

DHL, FedEx and Amazon all have air cargo facilities at CVG. Air Cargo World recently ranked it the top cargo airport in the world based on a composite score of customer service, performance and value.

Ali International was recently named the world’s fourth busiest air cargo hub by Airport Councils International and is home to UPS World Port, one of the largest package-handling facilities in the world. E-commerce is significantly increasing cargo flights in and out of the airport, where air-package volume grew by 22% year-over-year in 2019.

Capital Markets


"There is a deep buyer pool, both foreign and domestic, targeting Cincinnati but a lack of industrial investment opportunities has driven pricing to new records. Cincinnati’s topography limits the amount of available developable land. Core Class A cap rates are sub-5% with a premium for aggregated assets. There are strong expectations for increased sales volume in 2021."
Zachary Graham – Executive Vice President

Figure 4: Cap Rate Comparison

Source: CBRE Research.

Supply & Demand

Total transaction volume fell by 25% year-over-year in 2020 to 6.5 million sq. ft., largely because there were no large deals of 750,000 sq. ft. or more. Despite the drop, net absorption was on par with 2019 at 3.2 million sq. ft.

First-year taking rents increased by 8.7% year-over-year to $4.26 per sq. ft. despite 4.6 million sq. ft of new construction and a 1-percentage-point increase in the direct vacancy rate. 3PLs accounted for more than 50% of total transaction volume. Cincinnati’s central location will continue to attract occupiers. With nearly 4 million sq. ft. currently under construction, taking rents are expected to stabilize.

Figure 5: 2020 Occupier Transaction Market Share

Source: CBRE Research.

Figure 6: Transaction Volume

Note: Includes new leases, renewals, and user sales transactions 200,000 sq. ft. and above.
Source: CBRE Research.

Figure 7: Big Box Year-Over-Year Comparison

Source: CBRE Research.

Figure 8: Under Construction & Percentage Preleased

Source: CBRE Research.

Figure 9: First Year Taking Rents (psf/yr)

Note: Includes first year taking rents for leases 200,000 sq. ft. and above.
Source: CBRE Research.

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2020 North America Industrial Big Box Report & Outlook

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Contacts

James Breeze
Senior Director, Global Head of Industrial & Logistics Research
Research
+1 602 735 1939
Matt Walaszek
Director of Research
Research
+1 312 297 7686
John Morris
Executive Managing Director, Americas Industrial & Logistics and Retail Leader
Advisory & Transaction Services
+1 630 573 7020
Richard Barkham, Ph.D.
Global Chief Economist & Head of Americas Research
+1 617 912 5215
Spencer Levy
Chairman, Americas Research & Senior Economic Advisor
+1 617 912 5236