The KARNES Report Charlotte Industrial | 1st Quarter 2015 Industrial Vacancy Trends Charlotte Industrial Snapshot Number of Buildings Total Inventory (Sq. Ft.) Total Vacant (Sq. Ft.) Vacancy Rate Average Rent Sq. Ft. Under Construction Sq. Ft. Proposed Completions Net Absorption Warehouse 316 35,119,879 2,398,132 6.8% $4.36 620,622 2,130,436 310,960 65,810 Flex 280 10,784,001 1,513,140 14.0% $9.00 0 383,205 10,000 80,863 T he Karnes Charlotte industrial inventory comprises multitenant for lease warehouse and flex buildings larger than 15,000 square feet in Mecklenburg County and increased to over 45.9 million square feet during the first quarter of 2015. The delivery of new industrial space was reported in the Southwest submarket with an expansion of two 5,000-squarefoot flex buildings at Granite Commerce Center and 310,960 square feet of vacant warehouse space at Ridge Creek West. The 57,886-square-foot flex building at 2910 Whitehall Park Drive in the Southwest submarket that was a built for Source Technologies in 2000 was added to the Karnes inventory as Time Warner Cable leased and began consolidating its suburban offices into the building during the period. Warehouse space maintains a 77% share of the Karnes Charlotte industrial inventory with over 35 million square feet, while the inventory of flex space totaled 10.78 million square feet during the first quarter of 2015. 22% 17% 12% 7% 2% 1Q14 2Q14 3Q14 4Q14 Warehouse 6.8% 7.1% 6.5% 5.9% 1Q15 6.8% Flex 17.9% 17.6% 16.1% 14.8% 14.0% Average Rent Trends $10 $8 $6 $4 $2 $0 1Q14 2Q14 3Q14 4Q14 1Q15 Warehouse $4.25 $4.29 $4.33 $4.35 $4.36 Flex $8.70 $8.78 $8.84 $8.84 $9.00 Warehouse Leasing Performance Over 3.9 million square feet, or 8.5%, of Charlotte’s industrial space was vacant during the first quarter of 2015, up 0.5% of a point from the end of 2014 as net demand totaling 146,673 square feet was outpaced by the 320,960 square feet of new industrial supply. Charlotte’s warehouse market reported 65,810 square feet of positive net demand, which was outpaced by the vacant delivery of Ridge Creek West (310,960 square feet) during the first quarter of 2015, resulting in a 0.9% of a point increase in the warehouse vacancy rate from the end of 2014. At 6.8%, Charlotte’s first quarter of 2015 warehouse vacancy rate was nearly in line with the rate reported at the end of 2013 when the warehouse inventory was 1.1 million square feet smaller. The Southwest (106,396 square feet) submarket was the only warehouse market in the region to report positive net demand during the first quarter of 2015. Shopton Ridge 30-B reported the largest new tenant occupancy with Houston Wiring Cable renewing its lease on 42,000 square feet but downsizing out of 32,000 square feet, which was occupied by an undisclosed tenant during the period. Commerce Park reported significant tenant activity with an undisclosed tenant vacating 22,500 square feet, while two undisclosed tenants occupied 17,604-square-foot and 30,000-square-foot units, and East Coast Metal Distributors downsized from 32,800 square feet 1Q14 2Q14 3Q14 4Q14 1Q15 Net Absorption 363,098 -34,447 298,991 387,171 65,810 Completions 140,000 0 108,800 56,771 310,960 6.8% 7.1% 6.5% 5.9% 6.8% Vacancy Flex Leasing Performance Net Absorption Completions Vacancy 1Q14 2Q14 3Q14 4Q14 1Q15 44,565 78,524 168,659 142,394 80,863 0 78,319 5,400 0 10,000 17.9% 17.6% 16.1% 14.8% 14.0% The KARNES Report Charlotte Industrial 1st Quarter 2015 Data Provided By: Copyright 2015 Karnes Research Company. Not for reproduction or resale. www.karnesco.com toll free 800.879.7172 1 The KARNES Report Charlotte Industrial | 1st Quarter 2015 into 20,160 square feet. Other significant tenant gains in the Southwest warehouse submarket were reported at Lakemont Business Park I (15,000 square feet), Shopton Ridge 30-D (15,885 square feet), Airport Commerce Center - Bldg 1 (21,000 square feet), and SilverLake Distribution Center – V (25,277 square feet). Woodland Business Park XVI, in the Central submarket, reported the largest tenant contraction in the region with J.J. Haines & Co. vacating 36,450 square feet. Interchange Park, also in the Central warehouse submarket, reported significant occupancy by General Insulation (24,208 square feet). Significant blocks of warehouse space are expected to become available through 2015 from MaGrand Paper Corporation moving out of Commerce Center I (136,000 square feet), Belk, Inc. vacating NationsWest Distribution Center – B (259,200 square feet), and Louis Dreyfus closing at 1001 Bond Street (404,351 square feet). Positive net demand totaling 80,863 square feet was reported in Charlotte’s flex space during the first quarter of 2015, along with delivery of two 5,000-square-foot building expansions at Granite Commerce Center. At 14.0%, Charlotte’s first quarter of 2015 vacancy rate for flex space was 0.8% of a point lower than the rate reported at the end of 2014. At 73,432 square feet, the Southwest submarket dominated flex absorption during the period. Source Technologies’ former building at 2910 Whitehall Park Drive (57,866 square feet) was leased by Time Warner Cable and accounted for the largest flex moves in the market during the period. ScentAir Technologies Inc. relocated from South Point Business Park (36,404 square feet) and into Shopton Ridge 18-D (57,600 square feet). Oakhill Business Park - Scarlett Oak reported a net gain of nearly 16,000 square feet leaving just over 27,000 square feet available in the 77,000-square-foot building. Three buildings totaling just over 620,622 square feet of warehouse space were under construction in the Charlotte region during the first quarter of 2015 and could complete during the second quarter. West Pointe Business Park 8 (205,081 square feet) in the Northwest submarket secured a commitment for nearly 102,000 square feet during the period. The two buildings at InnerLoop North that will add over 415,000 square feet of warehouse space when completed have only secured commitment for 50,000 square feet of the new space. With no other pre-leasing announced in the three properties under construction, Charlotte’s newest warehouse deliveries could push the region’s warehouse vacancy over 8.0%, which would be the highest rate reported since the third quarter of 2013 (8.3%). Additional vacancy rate increases are expected through 2015 with large blocks of warehouse space expected to become available. Warehouse Historical Leasing Performance Net Absorption Completions Vacancy 2011 2012 2013 2014 364,649 885,969 2,249,955 1,014,813 2015 YTD 65,810 0 270,400 0 305,571 310,960 13.3% 12.5% 6.9% 5.9% 6.8% Flex Historical Leasing Performance Net Absorption Completions Vacancy 2011 2012 2013 2014 2015 YTD 33,732 149,018 41,019 434,142 80,863 0 46,000 0 83,719 10,000 20.0% 19.0% 18.4% 14.8% 14.0% 1Q15 Charlotte Warehouse Overview by Submarket Submarket Central CrownPoint/Matthews East North Northeast Northwest Southeast Southwest Total Inventory Vacancy SF 3,756,246 208,568 332,122 17,271 0 0 8,182,369 502,430 853,852 137,542 5,423,352 293,211 0 0 16,571,938 1,239,110 35,119,879 2,398,132 Vacancy 5.6% 5.2% 0.0% 6.1% 16.1% 5.4% 0.0% 7.5% 6.8% Rents $4.26 $6.58 $0.00 $4.44 $4.00 $3.50 $0.00 $4.51 $4.36 Absorption -3,283 -5,737 0 -24,066 -7,500 0 0 106,396 65,810 1Q15 Charlotte Flex Overview by Submarket Submarket Central CrownPoint/Matthews East North Northeast Northwest Southeast Southwest Total Inventory Vacancy SF 373,291 24,179 906,838 118,087 299,534 56,031 2,171,563 162,427 364,705 90,603 203,925 44,825 168,119 15,598 6,296,026 1,001,390 10,784,001 1,513,140 Vacancy 6.5% 13.0% 18.7% 7.5% 24.8% 22.0% 9.3% 15.9% 14.0% Rents $10.59 $8.48 $11.64 $10.13 $9.17 $7.67 $12.58 $8.38 $9.00 Absorption 9,913 9,014 987 -15,275 4,435 -1,015 -628 73,432 80,863 The KARNES Report Charlotte Industrial 1st Quarter 2015 Data Provided By: Copyright 2015 Karnes Research Company. Not for reproduction or resale. www.karnesco.com toll free 800.879.7172 2
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