Smooth Sailing Ahead

Key Takeaways

  • Average Industrial Rental Rate for Q3 2017 was $4.63 PSF for Warehouse
  • Net Absorption for Q3 2017 was 565,615 SF for Charlotte, Iredell County, Cabarrus County & York County
  • The Cabarrus County Submarket Made Up the Largest Portion of Absorption with 444,547 SF
  • The Largest Transactions in Q3 2017 Included: JJ Haines Leasing 500,000 SF, UPS Leasing 354,900 SF, RGA Enterprises Leasing, 193,742 SF, Ambassador Packaging Leasing 186,000 SF, Confidential Tenant Leasing 159,000 SF, Trane Leasing 108,946 SF and R&D Delivery Leasing 72,972 SF

Market Conditions

 The Charlotte Regional industrial market remains strong, with rental rates remaining at historic highs and sale prices increasing. During the third quarter of 2017, net absorption for Charlotte
and surrounding counties was a positive 565,615 SF. This was a decrease from the second quarter of 2017, which showed a positive absorption of 1,246,961 SF. The Cabarrus County submarket made up the largest percentage of the positive absorption with 444,547 SF, followed by the Airport/West submarket with a positive absorption of 195,410 SF and thirdly, York County submarket with a positive absorption of 166,231 SF. The East submarket had the largest negative absorption with (445,014) SF.

Larger warehouse projects under construction in the third quarter of 2017 included The Keith Corporation’s build-to-suit for Staples of 600,000 SF, McCraney’s Riverwalk building of 507,512 SF and The Keith Corporation’s build-to-suit for La-Z-Boy of 90,000 SF. The third quarter’s largest transactions included JJ Haines leasing 500,000 SF, UPS leasing 354,900 SF, RGA Enterprises leasing 193,742 SF, Ambassador Packaging leasing 186,000 SF, Confidential Tenant leasing 159,000 SF, Trane leasing 108,946 SF and R&D Delivery leasing 72,972 SF.

The overall vacancy rate, which includes warehouse and flex, for the third quarter 2017 was 4.87% compared to 4.50% for the second quarter 2017. The average industrial rental rate was $4.63 PSF for warehouse, increasing from the previous quarter’s rate of $4.52 PSF. The current rate represents a year-over-year increase of 4.04% from third quarter 2016, where the rate was $4.45 PSF. The average industrial rental rate at the start of 2017 began at $4.38 PSF.

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