Industrial Tenants Rethink Buy/Lease Decision

There are signs that the manufacturing sector is having a spring reawakening, as durable goods orders are climbing again. And vacancy rates in leased industrial space declined in the first quarter, reversing four straight quarters of increasing vacancies, according to research by the Minneapolis-St. Paul office of Cassidy Turley Commercial Real Estate Services.

Overall, the leading indicators of demand for industrial real estate are rebounding, making the outlook for 2010 and beyond “very strong,” according to a March report by AMB Property Corp., one of the largest industrial building owners in the country.

But while the days of the tenants’ market may be numbered, some manufacturers are discovering that now may be a buyer’s market. Low prices, low interest rates, tax incentives, and local business development grants may make buying industrial real estate a better deal than leasing it.
Companies that have recently decided to buy industrial or commercial property rather than rent it include U.S. Water Services, which paid $1.6 million for a building in St. Michael, Minn., Bob's Wood Specialties of Burnsville, a maker of custom kitchen cabinetry and supplier of granite and marble countertops, and Bedford Technologies, a major manufacturer of plastic lumber products headquartered in Worthington.