Much has been made of the booming office and apartment construction markets in Charlotte. But there’s another category with low vacancy rates that developers are paying attention to as well: industrial.
A low vacancy rate is leading some developers to start building speculative industrial space, and others to buy. Charlotte-based Crescent Communities broke ground last week on a new building at AirPark West, set to be a 209,000-square-foot building at Interstate 85 and Sam Wilson Road. And Florida-based Adler Kawa Real Estate Advisors paid $33 million for Shopton Ridge Business Park in southwest Charlotte.
The industrial vacancy rate for warehouse space was just 5.9 percent in Charlotte in the fourth quarter, according to research firm Karnes. That’s down from 14.4 percent in 2010, and lower than both apartment and office vacancy rates. The available inventory has gone up just 7 percent over that same time.
The vacancy rate for flex-space – a building that combines some office or showroom space with industrial – was higher, at 14.8 percent, compared with 20.3 percent in 2010. Charlotte has about three times as much warehouse space as flex-space (34.5 million square feet vs. 10.7 million).
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Crescent said that low vacancy rate made constructing a spec building appealing. Low vacancy rates mean rent growth, especially as demand increases.
“This is the ideal time to break ground on a spec industrial facility in this market,” said Ned Austin, a vice president on Crescent’s commercial team, in a statement. “With the economy improving and industrial vacancy rates tightening, this new facility is poised to attract tenants quickly.”
Nicholas Rahman of Adler Kawa said there’s room for rents to go up in the industrial segment.
“Charlotte is a target market for us,” he said. “We believe it’s still an economy that’s on the rise.”
And although apartment complexes and office towers tend to get more attention – they’re usually taller, splashier and in central business districts, after all – analysts expect to see more industrial buildings break ground. A recent report on the Charlotte industrial market from real estate consulting firm Avison Young predicted tight inventory will prompt more speculative building.
For tenants, fewer options and higher rents are likely to continue.
“With limited Class A options, tenants are facing market conditions not seen since the early 2000s,” the report states. “Over the last seven years, tenants have benefited from low rates, free rent and a multitude of choices. Today’s environment is vastly different.”