Second Quarter Absorption Reaches Over Two Million Square Feet

Key Takeaways

  • Average Industrial Rental Rate for Q2 2018 was $4.57 PSF for Warehouse
  • Net Absorption for Q2 2018 was 2,072,933 SF for Charlotte, Iredell County, Cabarrus County & York County
  • The South Submarket Made Up the Largest Portion of Absorption with 1,089,615 SF
  • The Largest Transactions in Q2 2018 Included: Tricor Braun's lease of 124,740 SF at Shopton Ridge, TrakMotive's lease of 100,000 SF at Concord Airport Business Park, Boxman Studios' lease of 66,380 SF at Twin Lakes, TW Metals Renewal of 50,400 SF at Brookwood and Dental Imagings' lease of 40,000 SF at Lakemont West.

Market Conditions

The Charlotte Regional industrial market remains strong, with rental rates near historic highs and sale prices steadily increasing. During the second quarter of 2018, net absorption for Charlotte and surrounding counties was a positive 2,072,933 SF. This was an increase from the first quarter of 2018, which showed a positive absorption of 790,294 SF.

The South submarket made up the largest percentage of the positive absorption with 1,089,615 SF, followed by Iredell County submarket with a positive absorption of 484,075 SF and third, the East submarket with a positive absorption of 369,290 SF. The Northwest submarket had the largest negative absorption with (185,215) SF.

Larger warehouse projects under construction in the second quarter include Geneva Commerce Center consisting of 351,520 SF, Beacon’s John Price Road Building of 220,683 SF and Scanell’s 169,000 SF building at The Park at Huntersville. The second quarter’s largest transactions included Tricor Braun’s lease of 124,740 SF at Shopton Ridge, TrakMotive’s lease of 100,000 SF at Concord Airport Business Park, Macomb Group’s lease of 80,000 SF at Steele Creek Commerce Park, Boxman Studios’ lease of 66,380 SF at Twin Lakes, TW Metals renewal of 50,400 SF at Brookwood and Dental Imaging’s lease of 40,000 SF at Lakemont West.

The second quarter’s overall vacancy rate (which includes warehouse and flex) was 5.40% and remained the same as the first quarter 2018 with 5.40%. The average industrial rental rate was $4.57 PSF for warehouse, which is five cents lower than the previous quarter’s rate of $4.62 PSF. This rental rate is still near an all-time high for industrial properties.

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 owner occupiers continues to be a challenge within the market.