An overhang of vacant industrial space in the Cedar Rapids real estate market has dwindled sharply in the last six months, with two major factories in the process of being sold.

Industrial space listed for sale or lease in Cedar Rapids dropped from more than 1.5 million square feet in May to around 900,000 square feet in October, according to the October Commercial Market Overview report from Scott Olson of Skogman Commercial.

Many smaller buildings were leased or sold, Olson said,  but two big properties that are in the process of being sold had the greatest impact on the industrial space picture.

The 111,000-square-foot former Midland Forge factory at 101 50th Ave. SW., which was closed nearly three years ago by Columbus McKinnon Corp., was recently placed under contract, Olson said.

A pair of buyers are in advanced discussions for a joint bid to acquire about three-fourths of the Terex Cedarapids factory complex in northeast Cedar Rapids. The complex at 909 17th St. NE consists of 51 total acres and 578,307 square feet of manufacturing space. 

Two individuals involved in the offer want to buy about 75 percent of the property in two different sections, Olson said. They plan to remove most  of the older buildings and retain the newer structures. The property is being handled by Olson and Doug Laird of Skogman Commercial.

The sale of the Terex property, if completed, would likely take place early next year, Laird said. It still faces a few obstacles including environmental issues that must be addressed. The Midland Forge sale is more advanced and could take place within weeks.

The Terex Cedarapids complex was used to make rock crushing and road paving equipment by Terex Corp. It closed in June 2010.

 Most of the industrial space in Cedar Rapids is in the southwest quadrant, where Midland Forge is located. The percentage of vacancies located in the southwest quadrant shrunk from 80 percent of the total to 67 percent, the report said. Lease rates also softened as the majority of space left on the market is in older buildings

The remainder of the commercial market hasn’t seen such dramatic change over the past six months. Olson said the office market will shift dramatically into surplus mode in early 2012. A raft of new government buildings under construction will be ready for occupancy, leaving several hundred thousand square feet of space on the market in older buildings they previously occupied.

Olson said leasing activity in the office sector was good during the last six months, but gains were offset by large amounts of new space coming onto the market. Verizon, for instance, is leasing 100,000 square feet of space in its office tower on Second Avenue SE that has become surplus to its needs over the years. Because the lease rates are low and parking is available, Olson said, it may make it difficult for downtown buildings to hold or raise their lease rates.

Building sales for investment purposes are heating up, the report said, particularly deals involving single-tenant buildings. Retail space remains the softest sector in the Cedar Rapids commercial market, with most of the recent leasing activity coming from service rather than retail tenants.

Olson and Laird