Industrial Forecast: Clear & Sunny

Key Takeaways

  • Average Industrial Rental Rate for Q2 2017 was $4.80 PSF for Warehouse
  • Net Absorption for Q2 2017 was 1,246,961 SF for Charlotte and the entire Mecklenburg County
  • The Airport/West Submarket Made Up the Largest Portion of Absorption with 480,363 SF
  • The Largest Transactions in Q2 2017 Included: Staples' Lease of 600,000 SF, Bonded Logistics' Lease of 124,055 SF, Commercial Works' Lease of 83,200 SF, Fred Jones Enterprises' Lease of 80,000 SF and Anixter's Lease of 50,000 SF.

Market Conditions

The Charlotte Regional industrial market remains strong, with rental rates nearing historic highs and sale prices increasing. During the second quarter of 2017, net absorption for Charlotte and Mecklenburg County was a positive 1,246,961 SF. This marked an increase from first quarter 207, which showed positive absorption of 551,910 SF. The Airport/West submarket made up the largest percentage of the positive absorption with 480,363 SF, followed by the South submarket with a positive absorption of 399,152 SF. The Northwest submarket had the only negative absorption with (34,999) SF. Larger warehouse projects under construction in the second quarter 2017 included Childress Klein’s Brookwood XI (91,200 total SF) and Beacon Partners’ Metrolina Building IV (136,237 total SF). The second quarter’s largest transactions included Staples’ lease of 600,000 SF, Bonded Logistics’ lease of 124,055 SF, Commercial Works’ lease of 83,200 SF, Fred Jones Enterprises’ lease of 80,000 SF and Anixter’s lease of 50,000 SF.

The average industrial rental rate was $4.80 per square foot for warehouse, increasing slightly from the previous quarter’s rate of $4.71 per square foot. The current rate represents a year-over-year increase of 5.49% from the second quarter of 2016 where the rate was $4.55 per square foot.  (For the record, 2016 began at $4.55 per square foot in first quarter. Third quarter brought $4.76 per square foot, followed by $4.79 per square foot in fourth quarter.)

Demand continues to be high for industrial space, and as in past quarters, the common theme in the market is the lack of space in the 20,000 SF to 50,000 SF range. Developers are willing to spec larger buildings but still hesitant to construct smaller buildings.