Positive Absorption Pushes Rental Rates for Fourth Consecutive Quarter

Key Takeaways

  • Average Industrial Rental Rate for Q2 2016 was $4.55 PSF for Warehouse
  • Net Absorption for Q2 2016 was 1,126,970 SF for Mecklenburg County
  • The South Submarket Made Up the Largest Portion of Absorption with 759,995 SF
  • The Largest Transactions in Q2 2016 Included: Positec Leasing 165,682 SF, Exel Leasing 109,200 SF, Etimex Leasing 106,065 SF and PODS Leasing 83,200 SF

Market Conditions

The Charlotte Regional industrial market continues its streak of low vacancy as lease rates and sale prices steadily climb. Net absorption for Mecklenburg County during the quarter was positive 1,126,970 SF. This compares to first quarter of 2016, which had a negative absorption of 545,683 SF. The South submarket made up the largest percentage of the positive absorption with 759,995 SF, followed by the Northwest submarket with positive absorption of 134,523 SF. Larger warehouse projects that were under construction in the second quarter of 2016 include Steele Creek 6, Ridge Creek West III and Wilkinson Commerce Center. The larger deals in the second quarter were Positec leasing (165,682 SF), Exel leasing (109,200 SF), Etimex leasing (106,065 SF) and PODS leasing (83,200 SF). In addition Amazon leased 397,800 SF that will be denoted in the third quarter. The second quarter vacancy rate was 5.80%, compared to 6.50% in the prior quarter. The average industrial rental rate was $4.55 per square foot for warehouse, which increased 8.33% from the previous quarter’s rate of $4.20 per square foot.

Industrial demand throughout the area remains strong. The common theme in the market continued to be the lack of space in the 20,000 to 50,000 square feet range and lack of outside storage / trailer parking. Trinity Partners has started site work for a park that will include five buildings of various sizes, totaling 250,000 SF. This could help absorb the demand for the smaller single-tenant buildings. The larger bulk warehouses experienced good activity in the second quarter as well. Amazon leased Childress Klein’s Wilkinson Falls facility near the airport and Liberty leased its vacant pad in a build-to-suit transaction at CDC South to Exel for 109,200 SF.