Industrial Developers continue to flock to the SouthEast
- Under construction product jumped over 4 million square feet from Q4 2021, bringing the total to 14.07 MM SF as developers continue to be bullish in the Charlotte MSA.
- Deal terms continue to be favorable for Landlords with the overall market asking rate rising to $7.29/SF NNN.
- Tenants are being forced to redefine their real estate expectations as many are competing with multiple users for a singular space. Winning the battle typically involves credit scrutiny, shorter terms, higher rents, and increased annual escalations.
The Industrial Market in 2022 started out just as hot as 2021 ended, spurring more development in the greater Charlotte market than we have seen in years past. The Charlotte Industrial Market saw more than 3.3 million square feet of Net Absorption in Q1 2022, creating opportunities for landlords to demand higher rental rates and more favorable terms for ownership. New supply is still attempting to keep pace with demand, as there is currently 14.7 million square feet currently under construction in the greater Charlotte Market. Investors and Developers alike are expanding their understating and definition of what the geographical Charlotte market currently is, and most importantly, how far tenants are willing to locate out of center city Charlotte. Charlotte continues to see a sense of urgency in speed to market on all fronts.
Absorption and vacancy continue to fall in parallel. Vacancy has hit another new low at 4.8%, which is 95 basis points lower than Q1 of the previous year. Because of holidays, supply chain delays, and weather impacts, there was only 1.5 MM SF of new supply delivered and almost 1.7 MM SF of net absorption. Expect the development pipeline to double the amount of new supply over the next quarter.