At the end of 2012, the Tri-City markets contained a total of 105 million square feet of warehouse space and 34.8 million square feet of flex space. With 52.4 million square feet of warehouse space, the Triad market accounted for approximately 50% of the Tri-City warehouse space. The Charlotte warehouse market ranked second with 33.5 million square feet, while the Triangle market maintained 18.8 million square feet.
The 270,400 square feet of warehouse space completed in the Charlotte market during 2012 accounted for all of the new warehouse space completed among the Tri-City regions. For the Triangle and Triad markets, 2012 marked the third year in a row where no new warehouse space was delivered. The 270,400-square-foot Ridge Creek Distribution Center IV building in Charlotte was the only warehouse completion during 2012. The building, which was developed as a speculative warehouse project, completed with Averitt Express occupying 68,000 square feet. While new warehouse deliveries in the Charlotte market totaled nearly one million square feet between 2008 and 2012, the Triangle market reported only 412,940 square feet of new warehouse deliveries during the same period. New warehouse completions in the Triad market totaled 1.18 million square feet between 2008 and 2012, with all of the new construction occurring during 2008 and 2009.
All three Tri-City warehouse markets reported vacancy rate decreases during 2012, with the Triad market seeing the greatest improvement during the period. Warehouse net absorption totaled 2.16 million square feet in the Triad market during 2012, which resulted in a 5.5%-point decrease in vacancy to 16.8%. In addition to the demolition of several outdated and vacant facilities, the Triad market also reported significant leasing activity during 2012, with Pepsi Bottling Ventures’ occupancy of 526,320 square feet at Union Cross Business Park III representing the largest gain in both the Triad and the Tri-City area. Other notable new occupancies in the Triad market during 2012 included an undisclosed tenant occupying 300,000 square feet at 645 North Park, Rock-Tenn Converting Company occupying 220,500 square feet at 520 Northridge Park Drive, and United Medical occupying 142,557 square feet at the Executive Delivery building.
With a year-end 2012 warehouse vacancy rate of 12.5%, the Charlotte region reported the lowest vacancy rate among the three markets. The warehouse vacancy rate in the Charlotte market decreased 0.8% of a point from the 13.3% reported at the end of 2011 as net demand totaling 885,969 square feet outpaced new supply totaling 270,400 square feet. Despite the decrease during 2012, the Charlotte vacancy rate remains 0.7% of a point higher than the 11.8% reported at the end of 2008. The most notable gains in warehouse occupancy in the Charlotte market during 2012 were reported at Ridge Creek Business Center II, where DMSI occupied 215,000 square feet; CrossPoint Center 1, where Rooms To Go occupied 117,400 square feet; 4101 S. I-85 Service Road, where Park N Go occupied 116,891 square feet; and at Shopton Ridge 30-C, where Gift Services occupied 112,000 square feet. Notable new vacancies in the Charlotte region included Forward Air vacating 215,000 square feet at Ridge Creek Business Center II and an undisclosed tenant vacating 117,400 square feet at CrossPoint Center I.
The Triangle market reported at 1.7%-point decrease in warehouse vacancy during 2012 as net demand totaling 338,809 square feet was met with no supply-side pressure. Despite the improvement during 2012, the warehouse vacancy rate in the Triangle remained 4.6% points higher than the 9.1% reported at the end of 2008. The largest gains in occupancy in the Triangle warehouse market during 2012 were reported at the Beltline Center, where Superior Distribution occupied 67,538 square feet; Research Tri-Center North III /IV, where Amcor occupied 65,546 square feet; Research Tri-Center – South II, where UPS Supply Chain Solutions occupied 62,262 square feet; and Globe Center 5, where Tecan occupied 59,420 square feet.
Flex space is relatively evenly divided between the Tri-City markets. The Triad market ranks first in terms of flex inventory with nearly 12.7 million square feet. The Triangle market ranked second at the end of 2012 with a flex inventory of nearly 11.5 million square feet, while the Charlotte market’s flex inventory totaled nearly 10.6 million square feet. A total of 71,500 square feet of flex space was completed in the Tri-City markets during 2012. The Charlotte market accounted for 64% of the new flex completions during 2012 with the delivery of the 46,000-square-foot Northlake Commerce Center – Phase II. The remaining 25,500 square feet of flex space completed during 2012 was reported in the Triad market at South Park Business Center, which was leased entirely to Carolina North Manufacturing Inc. upon completion.
Flex vacancy rates decreased in each of the Tri-City markets during 2012. Positive net demand totaling 117,001 square feet in the Triangle flex market during 2012 resulted in a 1.0%-point decrease in vacancy. Despite the decrease during 2012, the 15.4% Triangle vacancy rate remained 3.2% points higher than the rate reported at the end of 2008. The Charlotte flex vacancy rate decreased 1.0% point during 2012 to total 19.0% as net absorption totaling 149,018 square feet outpaced new supply totaling 46,000 square feet. The Triad market reported a 2.1%-point decrease in its flex vacancy rate as net absorption totaling 119,216 square feet outpaced new supply totaling 25,500 square feet.
With positive net demand totaling 149,018 square feet, the Charlotte region reported the highest level of net flex demand during 2012. The Triad region ranked second with 119,216 square feet of net demand during 2012. The largest gain in occupancy of flex space in both the Triad market and the Tri-City region was reported at Rock Creek Center, where an undisclosed tenant occupied 102,000 square feet. The largest new occupancy in the Charlotte market was reported at Steele Creek Business Park, where an undisclosed tenant occupied 31,818 square feet. The largest contraction in the Charlotte market was reported at Airport Center Building H, where Solstas Labs Partners vacated 54,377 square feet. Net demand in the Triangle flex market totaled 117,001 square feet during 2012. The largest gain in occupancy in the Triangle flex market was reported at 4900 Prospectus Drive, where Kestrel Heights Charter School occupied 50,950 square feet. The most significant contraction in both the Triangle region and among the Tri-City markets was reported at Triangle Business Center 7, where Kendle vacated 81,370 square feet.
Weighted average rents in the flex market ranged from a low of $5.35 per square foot in the Triad to a high of $10.33 per square foot in the Triangle. The average flex rent increased in both the Charlotte and Triangle markets during 2012, while the Triad market reported a $0.25-per-square-foot decrease. The Triangle market was the only Tri-City market to report an increase in flex rents from the rate reported at the end of 2008.
No warehouse or flex space was reported under construction in the Charlotte or Triangle markets at the end of 2012. There were four industrial buildings under construction at the end of 2012 in the Triad market totaling 517,660 square feet. The 301,910-square-foot McConnell Center 5 building was the largest project still under construction as the project was completed to shell but will not complete until a tenant has been located. A 134,650-square-foot building at 1023 Corporate Park Drive in Alamance County was the second largest warehouse building under construction in the Triad at the end of 2012. No other flex space was reported under construction in any of the Tri-City markets at the end of 2012.
The proposed pipeline of warehouse space has been relatively flat in recent years with much of the 5.4 million square feet proposed in the Tri-City markets on hold. The Triad market accounts for the largest share of the planned space with over 3.0 million square feet of proposed warehouse inventory, while the Charlotte market ranks second with just over 1.75 million square feet proposed. The proposed inventory of flex space is even smaller as approximately 719,731 square feet of space is proposed, with the 383,205 square feet planned for the Charlotte market accounting for 53% of the space.
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