Land Scarcity and the Increase in Industrial Land Prices Throughout Ohio and Nationally

Demand for industrial space, and land to build it on, surfaced prior to March 2020 as a result of the already-widespread trend of online ordering and home delivery from Amazon, Walmart and other companies expanding beyond brick and mortar. Factors such as social distancing, limitations to in-person shopping and the expansion of remote work settings, naturally led grocers, pet food suppliers, vitamin and supplement distributors and hundreds of other consumer goods companies to either invest in home delivery or suffer potential setbacks in their profitability and viability. Building warehouse and distribution centers in strategic locations around the country was the immediate and short-term requirement, but the availability of buildable, affordable land was, and remains, key.

One significant topic for 2022, according to the Newmark industrial research thought Leadership piece The Future of Industrial Real Estate: Trends for 2022 and Beyond, is inventory growth and modernization strategies. In the report, two of the five key points address the issues of scarcity and cost of land: expanding market boundaries in search of land and labor – and – exploring remediation and revitalization of contaminated land sites. In fact, according to Newmark research, land prices have “risen swiftly across the country”. The average per-acre pricing on land purchased for industrial development in the United States increased 36% from mid-year 2020 to August 2021.

In another report, Newmark Research found secondary and tertiary markets “present less resistance to development and greater flexibility in land use planning than dense, land-constrained gateway markets.” However, some secondary markets have lagged behind their counterparts such as Cleveland, in comparison to Columbus, Ohio, a top 10 national market in industrial construction growth with a 6.3% development pipeline as a percent of current inventory, as large land sites in Cleveland that can accommodate buildings 500,000 square feet or larger are few and far between.  Additionally, Lake Erie to the north occupies three quarters of Ohio, hindering development on one side of the market.

Nevertheless, the state of Ohio, and the Cleveland metro market, have seen industrial land prices increase. Land sales measuring over five acres in the state of Ohio with a proposed industrial use – industrial, industrial park, warehouse, distribution –peaked at an average of $113,300/acre in the second quarter of 2020, during the beginning of the pandemic. Aside from that outlier, Ohio industrial land prices in the first quarter of 2022 averaged $59,946/acre, up from $35,607/acre in the first quarter of 2021, a more than 68% increase. In fact, over the last five years, 1Q17-1Q22, industrial land prices in Ohio have averaged $52,357/acre, compared to an average of $27,372/acre from the previous five years, 1Q12-1Q17, a 91% increase.

Between 1Q17 and 1Q22, the Cleveland metro market has seen an average industrial land sale price of $55,288/acre, compared to an average of $27,159/acre between 1Q12 and 1Q17, a 104% increase over a 5-year timeframe. 

In the past five years, Ohio has seen some of its highest land sales spread out across several markets. A few of the most expensive industrial land sales that transferred with a proposed industrial use – industrial, industrial park, warehouse, distribution – include:

• 6.185 acres on Rialto Road in West Chester Township in the Cincinnati market, sold for $2.5 million, or $404,532/acre, to trucking company Quicker Logistics Incorporated in 1Q22
• 5.08 acres on Independence Parkway in Twinsburg’s Cornerstone Business Park in the Cleveland market sold to Ares Real Estate Management Holdings LLC in 3Q19 for $1.13 million, or $222,745/acre, the owner of an adjacent property, to accommodate the expansion of facilities leased to a third party
• Portfolio of three land properties at 3815 Lockbourne Industrial Pkwy. – 1500 Harmon Ave., 1669 Harmon Ave. – totaling 23.60 acres in the Columbus market, sold for $5.1 million, or $216,102/acre, to the AMZA Group in 4Q21, a national investor in industrial outdoor storage facilities nationwide
• In 4Q19, Amazon purchased two data centers in New Albany in the Columbus market – 104.59 acres on Harrison Road for $20.39 million, or $194,999/acre, and 112.16 acres on Beech Road for $21.84 million, or $194,731/acre
• In 4Q20, Sherwin-Williams purchased 118.84 acres in Brecksville in the Cleveland market for $15.19 million, or $127,837/acre, as a research and development facility, currently under construction

As of mid-April 2022, the Cleveland, Columbus and Cincinnati metro areas saw several industrial land sites over five acres marketed for sale. However, the availability of larger industrial land sites over 50 acres, more able to accommodate large warehouse and distribution builds, were most abundant in the Columbus market (13), followed by Cincinnati (11) and Cleveland (7). Ohio is an affordable and well-located option for developers looking to build state-of-the-art warehouse and distribution centers, with the average industrial land sale price at $52,357/acre, less than half the national average price of $117,951/acre.

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*Sources: Newmark Research, CoStar