Fourth Quarter Closes Strong for a Banner Year

Key Takeaways

  • Average Industrial Rental Rate for Q4 2017 was $4.63 PSF for Warehouse
  • Net Absorption for Q4 2017 was 664,161 SF for Charlotte, Iredell County, Cabarrus County & York County
  • The North Submarket Made Up the Largest Portion of Absorption with 331,838 SF
  • The Largest Transactions in Q4 2017 Included: Corsan's lease of 185,570 SF, City Electric's lease of 158,760 SF, Duff Norton's lease renewal of 145,500 SF, 1-800 Contacts' lease of 114,470 SF, Confidential Tenant's lease of 92,400 SF and Carolinas Healthcare's lease of 46,570 SF.

Market Conditions

The Charlotte Regional industrial market remains strong, with rental rates coasting at historic highs and sale prices increasing. During the fourth quarter of 2017, net absorption for Charlotte and surrounding counties was a positive 664,161 SF. This was an increase from the third quarter of 2017, which showed a positive absorption of 565,615 SF.

The North submarket made up the largest percentage of the positive absorption with 331,838 SF, followed by the South submarket with a positive absorption of 203,981 SF and thirdly, the Airport/West submarket with a positive absorption of 115,219 SF. The Northwest submarket had the largest negative absorption with (140,326) SF.

Larger warehouse projects under construction in the fourth quarter included Scannell Properties’ LegacyPark East Phase I building at 193,750 SF and Scannell Properties’ Wilkinson Commerce Center Building III 172,000 SF. The fourth quarter’s largest transactions included Corsan’s lease of 185,570 SF, City Electric’s lease of 158,760 SF, Duff Norton’s lease renewal of 145,500 SF, 1-800 Contacts’ lease of 114,470 SF, a confidential tenant’s lease of 92,400 SF, and Carolinas Healthcare’s lease of 46,570 SF.

The fourth quarter’s overall vacancy rate, which includes warehouse and flex, was 4.80% compared to 4.70% for third quarter 2017. The average industrial rental rate was $4.63 PSF for warehouse, which matched the previous quarter’s rate. The current rate represents an increase 5.63% from first quarter 2017, where the rate was $4.38 PSF.

Demand continues to be high for industrial space, as evidenced by absorption throughout the year. E-commerce is fueling industrial fundamentals, and there continues to be new development in the larger/bulk warehouses throughout the Charlotte MSA. However, the supply of industrial buildings for sale remains low, therefore finding inventory for interested clients wishing to purchase remains a challenge.