Smooth Sailing Continues for Charlotte's Industrial Market

Key Takeaways

  • Average Industrial Rental Rate for Q1 2018 was $4.62 PSF for Warehouse
  • Net Absorption for Q1 2018 was 790,294 SF for Charlotte, Iredell County, Cabarrus County & York County
  • The Cabarrus County Submarket Made Up the Largest Portion of Absorption with 460,890 SF
  • The Largest Transactions in Q1 2018 Included: Confidential Tenant lease of 431,035 SF at LegacyPark West, Maintenance Supply lease of 95,272 SF, Carolina Crossdocks’ renewal of 65,000 SF, Tosca’s lease of 63,511 SF and Campbell Snacks’ lease of 63,000 SF.

Market Conditions

The Charlotte Regional industrial market remains strong, with rental rates coasting at historic highs and sale prices steadily increasing. During the first quarter of 2018, net absorption for Charlotte and surrounding counties was a positive 790,294 SF. This was an increase from the fourth quarter of 2017, which showed a positive absorption of 664,161 SF.

The Cabarrus County submarket made up the largest percentage of the positive absorption with 460,890 SF, followed by the South submarket with a positive absorption of 390,712 SF and third, the Airport/West submarket with a positive absorption of 138,390 SF. The East submarket had the largest negative absorption with (198,010) SF.

Larger warehouse projects under construction in the first quarter included The Rockefeller Group’s Lakemont77 consisting of 370,000 SF, Crescent Communities’ Black & Decker Building of 345,000 SF and The Meritex Company’s 79,420 SF building at CLT Logistics Center. The first quarter’s largest transactions included a confidential tenant lease of 431,035 SF at LegacyPark West, Maintenance Supply lease of 95,272 SF, Carolina Crossdocks’ renewal of 65,000 SF, Tosca’s lease of 63,511 SF and Campbell Snacks’ lease of 63,000 SF.

The fourth quarter’s overall vacancy rate, which includes warehouse and flex, was 5.40% compared to 5.00% in the fourth quarter 2017. The average industrial rental rate was $4.62 PSF for warehouse, which is one cent lower than the previous quarter’s rate of $4.63 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.