If the world falls apart on Jan. 1, at least we’ll have corn flakes for breakfast.
Drew Axelson, Midwest regional vice president for National Distribution Centers, a Vineland, N.J.-based warehousing and distribution firm, said his company has increased its storage space through February to prepare for increased storage needs related to Y2K problems.
The third-party-logistics firm has a number of major food industry clients for which it stores and moves goods, and he said they’ve been requesting extra space to handle any emergencies that might arise.
The goods include “a lot of cereals and cookies and things like that,” Axelson said.
Axelson was asked to find 250,000 square feet of short-term warehouse space in the Chicago area for a food company, but before a deal was done the company was able to pick up additional space in Columbus, Ohio, instead. He said he couldn’t disclose the company name.
Distribution Centers also added 100,000 square feet on a short-term lease on the East Coast. “Overall, our inventory levels are peaking right about now. Everybody is hedging their bets,” he said.
Axelson said he didn’t know whether the companies are anticipating increased demand from consumers stocking up on non-perishable items or whether they fear their own supply chains might be compromised by computer problems.
David Pals, senior vice president of Grubb & Ellis Co.’s industrial services group, said he’s received several inquiries from third-party-logistics firms but so far has done no deals.
“My take on it is that they must expect Y2K not to be a non-event,” he said. “They want to store materials for distribution for the next (two months) . . . like air compressors, generators and dehydrated foods.”
Pals said his view is that in January and February, the companies will need the space so they can handle all the returns from people who’ve found they don’t need all the emergency stuff they stockpiled.
He said these short-term deals are hard to do, because warehouse owners with available space don’t want to tie it up in short-term leases in case someone comes in wanting a 5- or 10-year deal.
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“In real estate terms it’s a curiosity,” he said. “I hope it’s a non-event.”
And if it is we can celebrate with cereal and cookies for all.
Living space: Apartment rents in the Chicago area have gone up 6 to 8 percent in the last 18 months, and one consequence seems to be that investors are buying up rental buildings at a hot pace.
A report from Marcus & Millichap, a major firm specializing in brokerage of investment property, said that the tightest rental markets are in Lakeview and Lincoln Park on Chicago’s North Side, where the vacancy rate is at 2 percent–which in the apartment business just about means there’s nothing available. Far north Rogers Park is also tight.
At the same time, investment sales of rental properties continue to be extremely strong despite higher interest rates, which some analysts said would slow apartment building transactions, the report said.
Average cap rates (income divided by price) range from 8 to 10 percent, indicating buoyant pricing, according to the report.
And 85 of the 145 sales transactions (over $500,000) in the first half of 1999 occurred in the city. The most active markets have been Lakeview, Lincoln Park and Wrigleyville, and they are expected to continue that way.
The report says Rogers Park, Edgewater, Uptown and Albany Park have seen a surge in investor activity “due mainly to the expectation that they will become the next growth areas.”
Spreading out: The Amoco Building at 200 E. Randolph Drive, which will become the Aon Center in a year when insurance giant Aon Corp. supplants BP Amoco PLC as the lead tenant, has another big tenant that is slated to grow bigger.
Omnicom Group/DDB Chicago has signed a lease expansion for 32,000 square feet, bringing its total occupancy to 230,000 square feet as of next February. Building owner Blackstone Real Estate Partners was represented by CB Richard Ellis in the deal.
Fringe group: Construction has started at 550 W. Jackson Blvd., the fourth midrise office building to go up on the Loop fringe during the current downtown office development cycle.
The 18-story, 420,000-square-foot structure, being developed by Chicago’s Mark Goodman & Associates Inc., integrates an existing 37-year-old, four-story structure into the new, high-tech building.