Blackstone is no stranger to huge deals, and its latest transaction makes it the owner of 3.5 million square feet of industrial property in the United Kingdom. Prologis Inc. sold the 13-property portfolio for an aggregate $335 million.

“We were pleased with the amount of interest this portfolio garnered as the combination of quality assets and lease term appealed to multiple investors,” Philip Dunne, president of Prologis Europe, said. “We have sold this portfolio as it no longer fit within our investment strategy, and offered us the ability to redeploy our capital.”

The portfolio comprises 13 properties located in England’s Midlands and Yorkshire. The properties are 100 percent leased with an average unexpired lease term that exceeds nine years.

Blackstone has been picking up large parcels of property in multiple sectors of late. In early January, the firm — in a partnership with DDR Corp. — spent $1.4 billion on a 47-property retail portfolio across 20 states. In December, Blackstone purchased 36 shopping centers from Equity One Inc. for $473 million, including the assumption of $177.4 million in debt. In October of last year, the firm purchased $1.1 billion of office assets from Duke Realty Corp., netting it 10.1 million square feet of property across 82 buildings.

The U.K. industrial market is similar to its Stateside counterpart, ending the year on a mixed note as events in Europe threaten to erode the confidence that rose toward the end of 2011. According to a fourth-quarter report by services firm Cushman & Wakefield Inc., manufacturing surveys at year’s end pointed to improved performance in December, but the strong showing didn’t erase the weaker outturns for October and November – when many producers reported their worst quarters since the middle of 2009.

“Debt” is going to be the name of the game for the European real estate markets in 2012, according to Emerging Trends in Real Estate Europe 2012, the industry forecast published by PwC and the Urban Land Institute. With daily reminders that interest-rate cuts on Greek bonds are still in limbo and debt-rating decreases for Euro-zone nations are on the rise, a turnaround looks to be tied directly to banks’ willingness to make commercial loans and whether the financial industry could face another collapse. The survey took responses from more than 600 commercial-property professionals across Europe to determine the overall course of the industry.

“The profound instability is affecting the providers of equity and debt,” Joe Montgomery, chief executive of ULI Europe, said. “We are operating in an environment that is very difficult to model. The uncertainty over the level of banks’ exposure to sovereign-debt default, coupled with uncertainty over the regulatory changes introduced as a result, has caused significant elements of the capital markets to be reduced to a state of near paralysis.”

In general, lenders are facing a level of pessimism over debt at levels not seen in years, according to John Forbes, the report’s author. Only 6 percent of lenders think that debt will be as available this year as it was in 2011, and a full 52 percent feel it will be substantially less available.

But not all news is gloomy, however. “The good news is that the view of respondents regarding the availability of equity is much more positive,” Forbes wrote. “Most promising is the response from institutional investors: 65 percent believe that equity will be moderately more available, with a further 10 percent believing that equity would be substantially more available.” And those lenders will play a significant role in the economy’s health, as all the players are interconnected. Mezzanine lenders need senior lenders to push debt into the marketplace, and insurance companies need time to build the right infrastructure to deploy capital.

With such uncertainty, it was difficult for the survey’s respondents to make sweeping generalizations about market sectors, but geography will certainly play a role in how investments will roll out from city to city. Istanbul, the report noted, has been the top market for commercial real estate investment for the past two years, “but that ranking is more a reflection of its long-term economic future than a sign that investors are about to rush to place their capital in the market.” And, while debt concerns continue to plague Spain and Italy, opportunistic investors may still see possibilities as banks begin to release assets later this year.

Overall, 2012 could be a turning point, the year that investors have been waiting for – or it may turn out to be a bust. Pressures from all directions could make finding funding solutions for banks an imperative, but whether investors get the bargains they would like is still very much an unknown. In general, the report’s bearish mood reflects the larger overall picture, and the coming months will certainly tell a clearer story.

Following on the heels of reports that call for an uptick in industrial activity for 2012, Trammell Crow Co. and USAA Real Estate have announced the groundbreaking on a 700,000-square-foot Class A spec distribution facility at Mountain Creek Distribution Center in Carlisle, Penn.

“Over the past decade the I-81 Corridor in Pennsylvania firmly established itself as one of the top industrial markets in the country. The market’s comparatively strong performance throughout the economic downturn has further solidified its position as a top tier market” said Andrew Mele, Senior Vice President, Trammell Crow Company. “We believe the project is well positioned to capitalize on continued market demand.”

Mountain Creek Distribution Center is a two building industrial project situated on 113 acres at Exit 44 of Interstate 81 in the renowned Central Pennsylvania industrial market. The project is approved for 1,302,500 square feet of Class A warehouse/distribution space designed to achieve LEED Core & Shell (CS) certification. The first building, scheduled for completion in the summer of 2012, is designed with cross dock loading, 32′ clear ceiling heights, 60′ x 47′6″ typical bay spacing, ESFR sprinkler systems and ample onsite trailer storage.

The industrial market looks to do well in 2012, thanks in part to a revving manufacturing engine as well as the fact that there are few projects in the construction pipeline. Limited construction – 2011 saw only 20.5 million square feet of completions, down from the five-year average of 88.1 million square feet – is increasing absorption rates in nearly every major market around the country, according to a fourth-quarter 2011 report by services firm Cushman & Wakefield Inc.

Jones Lang LaSalle has been retained to market the project to potential tenants.

USAA manages a multi-billion dollar portfolio including recent acquisitions of $3 billion and development assets of $2 billion. Trammell Crow has developed or acquired over 525 million square feet of buildings with a value exceeding $55 billion. As of June 30, 2011, Trammell Crow had over $3.5 billion of projects in process, $1.4 billion in its pipeline and $1.4 billion in long-term operating assets.

One of Cushman's industrial properties in Chicago

By the end of 2011, things were looking good for the industrial sector – and that trend looks to continue into 2012. New leases for industrial properties “returned to levels not seen since prior to the 2008/9 recession,” according to a new fourth-quarter 2011 report by Cushman & Wakefield Inc. More than 306 million square feet of new leases were completed last year, up 14 percent from the 269 million square feet signed in 2010 – which reached the highest level of activity since 2007.

“Two things are happening,” Jim Dieter, executive vice president and head of industrial brokerage for Cushman told Commercial Property Executive. “One, there is renewed confidence in the market. And two, we’re getting a verification that there is an acute shortage of big-box distribution space.”

Dieter noted some strong similarities in the country’s strongest industrial markets.

“When you look back at the last several years,” he said, “companies have looked to create supply-chain efficiencies. So when you see a Class A lease, it’s not always an expansion because they may have closed two locations to open another, more efficient one.” So the top markets, according to the report, were the country’s big distribution hubs of Dallas-Ft.Worth, Northern and Central New Jersey, Houston, California’s Inland Empire and even Chicago. “Those are the classic Tier 1 distribution hubs in the United States,” Dieter said, “which are showing very nice leasing activity. Companies are looking to open larger, more efficient distribution centers.”

Further, there are two factors fueling the expansion: The lack of new-space completions and well as the revving of the country’s manufacturing engine. Limited construction – 2011 saw only 20.5 million square feet of completions, down from the five-year average of 88.1 million square feet – is increasing absorption rates in nearly every major market around the country. And, for the last few years, industrial manufacturing has been dong very well in the U.S. despite the prevailing economic conditions.

“Manufacturing is the main driver within the industrial landscape,” Dieter said. “U.S. industrial manufacturing grows, and it improves export business. It improves distribution markets. It increases rail flow and intermodals. When then U.S. has a strong manufacturing component, it affects all the other components.”

As proof of his point, he noted that the national industrial vacancy rate declined to 9.2 percent by the end of 2011, down 1.1 percent from the end of 2010. Thirty of the 33 markets tracked by Cushman reported year reported year-over-year declines in vacancy, with the Inland Empire, the San Francisco Peninsula, Phoenix, Houston and Silicon Valley among the markets with the largest declines.

“We’re increasingly confident that we are at the beginning of a sustained recovery that will gain momentum over the next 12 to 24 months,” Dieter said.

In what is being described by commercial real estate industry experts as Orange County, Calif.’s largest industrial consideration of 2011, Menlo Equities snapped up the Irvine Crossings project, a 420,000-square-foot industrial warehouse and data center property in Irvine. Menlo acquired the high-quality asset from Irvine Crossings L.L.C. in a transaction valued at $47 million.

Occupying nearly 22 acres of land, the facility carries the addresses of 17871 Von Karman Ave. and 17836 Gillette Ave., and encompasses approximately 310,000 of industrial space and 110,000 square feet of data center accommodations. Tenants include cloud computing and collocation services provider Savvis and third-party logistics company 3PL, which leased 180,600 square feet during the third quarter of 2011. The property is 100 percent occupied.

Voit Real Estate Services represented both the buyer and seller in the transaction. “Irvine Crossings was a value-add deal in a great location,” Trent Walker, a senior vice president with Voit, noted in a prepared statement. “The in-place industrial rents were low, and there is the ability to expand the data center, making this a stable investment with upside potential.”

Gwinnett Park. Image courtesy CoStar Group.

Newmark Knight Frank has been tapped to provide leasing services for a 900,000-square-foot industrial flex portfolio near Atlanta, Commercial Property Executive has learned. Irvine, Calif.-based SVN Equities, the properties’ owner, has signed an agreement with the services firm to market 14 locations in two Norcross, Ga. business parks.

The NKF team will be responsible for leasing 200,000 square feet of space in Gwinnett Park, located at 4405 International Blvd. and nearly 706,000 square feet of space in Oakbrook North Business Park, located at 5300 Oakbrook Parkway. Gwinnett currently sits at a 65 percent occupancy rate; Oakbrook is at 70 percent.

“The portfolio consists mostly of office and flex space,” Marty Pinover, a senior managing director with NKF, told CPE. “[Since] it is Class B space, ownership is going to spend considerable amount of money for upgrades to the portfolio. We will lease space for a minimum of three years, but recently the inquiries have focused on larger space for mostly longer-term leases.”

And long-term leases have been the trend, especially in the Atlanta area. According to a third-quarter 2011 report by services firm Cushman & Wakefield, the city’s industrial conditions continued to improve through the fall of last year. “Despite ongoing cautiousness in the business sector,” the report noted, “Atlanta’s industrial real estate fundamentals improved, driven primarily by an ongoing expansion in manufacturing activity and improvement in consumer consumption in the first and second quarters, which has had positive ripple effects on the region’s warehouse/distribution product that accounts for the lion’s share of its industrial inventory.”

NKF’s internal research found the same results. “Absorption of space in the Northeast Atlanta submarket has been positive, and the third quarter’s increase in occupancy was the strongest of the year so far,” Pinover said. “The submarket should finish 2011 with its first positive year-over-year performance since 2008.”
Within a few days of receiving the assignment, the NKF team already signed on its first new tenant for the portfolio with the signing of Steak Out, a restaurant franchise, for 3,663 square feet at Oakbrook.

Windsor Renewal I, a division of The Broe Group, has taken a major step toward further developing the Great Western Industrial Park in Windsor, Colo., with the acquisition of 320 acres of land and 500,000 square feet of industrial buildings from Eastman Kodak Co. in a partial sale-leaseback transaction. Both parties are keeping mum on the purchase price.

The 1,800-acre Great Western Industrial Park, located at the Base of the Rocky Mountains, is designed around the Great Western Railway, the 80-mile regional rail system that Broe acquired in 1986. With the purchase of the property from Kodak, Broe will be able to add an additional two miles of rail to accommodate growing demand. The company will also ultimately make additional industrial space available for tenants eager to set up shop in the park, as Kodak will stay put in only a portion of the purchased buildings. Demolition of some of the remaining structures is on track to conclude this year.

The addition of the Kodak property marks yet another move in what has been a multi-year endeavor to increase the size of the Great Western Industrial Park. Kodak has played a large role in the expansion of the massive, master-planned manufacturing and distribution development, having sold more than a few acres of land to Broe since 2005.

By snapping up land bit by bit, Broe has created an industrial destination that serves as a magnet for manufacturing and energy businesses. Hexcel, Front Range Energy, Owens-Illinois, Reliant Holdings and Vestas are among the many companies that call the park home. Hexcel, a leading advanced composites company, opened its 100,000-square-foot facility in 2009.

In a prepared statement on the recent Kodak transaction, Clay Drake, a director of business development with Broe, noted, “This is an opportunity to redevelop and re-energize what was once a thriving campus in Windsor, by attracting new rail-served industry and creating jobs.”

Looking to capitalize on what will certainly be a growing economy in the next few years, Clarion Partners has acquired 78 acres of land in a northwest suburb of Sao Paulo. The company intends to develop and lease a Class A industrial facility that will eventually include 1.4 million square feet of space.

The project, slated to be a joint venture between Clarion and one of the firm’s clients, already includes a $100 million equity investment. As managing partner of the venture, Clarion has already forged a relationship with DHL Supply Chain – a company that has been a part of the Brazilian industrial market for more than a decade.

“Brazil is vibrant and growing, supported by powerful underlying fundamentals,” Jeb Belford, a managing director at Clarion, said. “With a lack of high-quality warehouse space in many parts of the country, we believe this provides an excellent opportunity to participate in the continued expansion of this increasingly important market.”

With major events on the country’s horizon, including the 2014 World Cup and the 2016 Olympics, Brazil is likely on the cusp of a boom period. Services firm CBRE Group Inc., in a December 2011 report, noted that industrial rents across the globe will continue to rise this year, especially calling out the São Paulo region. The city’s average asking rents for prime industrial space – which is exactly what Clarion intends to build – is the fourth-highest worldwide (exclusive of the United States), surpassed only by Tokyo, London and Singapore. Currently, the average sits at $13.98 per square foot.

Construction on the project began last month, and is slated to complete in mid-2012. DHL Supply Chain will lease approximately half of the first completed building, as well as “substantial portions of buildings two and three for itself and its clients.” The additional buildings are expected to be complete in 2013 and 2014.

With the new year comes a flurry of predictions about the next 12 months. CPE has synthesized a variety of forecasts from around the industry to create a snapshot of the trends that will shape commercial real estate in 2012. Prospects for the industrial, multi-family and office sectors appear to be modestly upbeat; for retail and the real estate capital markets, the outlook is more guarded.

CAPITAL MARKETS/ECONOMY:  For CMBS, the good news includes fewer delinquencies and a stable outlook, according to Fitch Ratings. However, the capital markets and the economy face any number of widely discussed challenges, ranging from the European debt crisis and cautious consumer spending to worries about an economic slowdown in China.

Markets to watch: “Larger metropolitan areas will continue to outperform smaller cities, tertiary markets, manufacturing hubs, and markets with heavy exposure to the housing industry downturn,” Fitch predicts. “This continues to make the Washington, D.C./Northern Virginia, New York metro, San Francisco, and Boston markets well positioned to take advantage of the economic recovery. Conversely, Phoenix, Detroit, Atlanta, Las Vegas, most Florida cities, and certain California markets will remain weak.”

OFFICE: For the U.S. office market, slow improvement should be the story in 2012. CBRE Econometric Advisors projects that the national vacancy rate will decline from 16.2 percent in the third quarter last year to 15.7 percent by the end of this year.  “Healthy corporate balance sheets, record profitability and sustained consumer demand suggest that the economic recovery will strengthen by mid-2012 and, as a result, office market fundamentals will continue to improve slowly throughout the year,” said Arthur Jones, senior managing economist for CBRE-EA.

Markets to watch: Best bets for rent growth in 2012-13 include such as gateway cities as New York City, Boston and San Francisco, as well as high-tech centers like Austin, Dallas, Pittsburgh and Salt Lake City, says CBRE EA. Vacancy rates will drop at least 80 basis points in Atlanta, Chicago, Houston, Dallas, Houston and Seattle, according to Cushman & Wakefield; In New York City, Philadelphia and San Francisco, vacancy will improve by at least 60 basis points.

MULTI-FAMILY: CBRE EA projects that multi-family vacancy will stay steady at 5.5 percent this year, a wash with 2011. Further dips are unlikely until the job market improves. An estimated 200,000 new units will come on line during the year.

In a survey conducted by Jones Lang LaSalle Inc. in conjunction with a recent RealShare conference, 39 percent of respondents said that multi-family cap rates in the most competitive markets will stay stable. Twenty-one percent expect a decline of 50 basis points or less, and 15 percent believe that cap rates will decrease more than 50 basis points. Another 15 percent predict that rates will rise, but by less than 50 basis points.

Markets to watch: San Francisco, San Jose, Austin, Denver, Seattle and Phoenix will show the strongest rent growth over the next two years, according to CBRE EA. The Jones Lang LaSalle/RealShare survey identified the most attractive locations for multi-family investment are Los Angeles, San Francisco, Dallas, San Diego and Phoenix. Survey respondents said they are most likely to sell assets in Las Vegas, Los Angeles, Washington, D.C., Atlanta, Houston and Phoenix.

RETAIL: Despite some encouraging signs, the retail sector’s long-awaited rebound will not begin before the third quarter this year at a minimum. “Until we have some market certainty in the U.S. and overseas plus sustained high levels of consumer confidence driven by higher paychecks, a stronger stock market and an improved housing market, a robust recovery will elude the retail sector,” explained Greg Maloney, president & CEO of Jones Lang LaSalle’ retail business unit.  Of the 18 markets surveyed by the firm, only Houston promises to favor owners during the first six months of the year.  Store closings may rise to 5,000 nationwide this year, more than double the 2,200 tallied in 2011.

On the plus side, availability will continue to decline from 13.3 percent at the end of the third quarter to 12.4 percent by the end of the year and 11.7 percent next year, according to CBRE EA. Those figures still remain higher than the previous all-time high of 11.3 percent, set in the second quarter of 2002.

Markets to watch: Austin, Columbus, Denver, Nashville and New York City will all post rent growth, CBRE EA predicts.

INDUSTRIAL: Growing demand for U.S. exports is fueling expansion by end users, and bargain rental prices are prompting some tenants to look for newer, higher-quality space. Availability could drop to 12.5 percent in 2012, a decline of 120 basis points from the third quarter last year and 210 basis points since the second quarter of 2010, according to CBRE EA. Rents should increase 2.4 percent nationwide, followed by a 5.8 percent hike in 2013.

Markets to watch: Oakland, Chicago and Philadelphia should all register declining availability. Meanwhile, Riverside, Calif., Los Angeles and Chicago will post the strongest rent growth this year, CBRE EA projects.

Industrial Contractors in Evansville, Ind.

Taking a big step in enhancing its civil business unit, Skanska USA has acquired Industrial Contractors Inc. for $135 million. The purchase of the Evansville, Ind.-headquartered contractor, a leader in the commercial, industrial and power markets, allows Skanska to enter the industrial sector in the Midwest and further enhance its presence in the energy sector.

The transaction included Skanska’s acquisition of ICI’s affiliate companies Professional Consultants Inc., Tri-State Refractories Corp., and Industrial Equipment Inc. Established in 1964, ICI has become a force in the Midwestern construction arena in its three areas of business: power and energy, commercial and light industrial and heavy industrial. Past ICI projects include work at American Electric Power Rockport in Rockport, Ind., and in the commercial sector, the $85.4 million, 260,000-square-foot Deaconess Gateway Hospital in Newburgh, Ind. The company closes 2011 with annual revenues totaling approximately $500 million.

“Our strategy has always been to increase our portfolio of services and expand our geographic footprint in the Midwest,” Richard Cavallaro, president of Skanska USA Civil. “The region is the manufacturing and industrial hub of the US, and home to some of the largest electrical power generating facilities in the country.” Skanska and its newly acquired division will also focus their efforts on construction projects in the higher education, healthcare and pharmaceutical industries.

With the merger, ICI is reborn as Industrial Contractors Skanska and becomes a unit of Skanska USA Civil, making up one-third of the business. It’s a blending of two companies with a history in high-profile projects and mirroring cultures. Part of that culture includes, as ICI chairman and CEO Alan Braun describes it, a “family feel.” Braun, who will stay aboard as an active advisor to ICS’s Midwest operations Skanska’s national civil operation, is a standard-bearer of the concept, as he is the son of the founder of ICI, Charles Braun.

Skanska USA is a subsidiary of Stockholm-based Skanska AB, which expanded its construction business footprint in other parts of the world this year. Earlier this month, Skanska Poland entered into an agreement to acquire 100 percent of the shares of PUDiZ Group, a leading road construction company in the region. And in October, Skanska Finland signed on to purchase Soraset Yhtiöt Oy, a civil construction firm, in an all-share transaction. Financial specifics of Skanska USA’s acquisition of ICI have not been publicized.