Editor’s Note: Each Friday, WRAL TechWire takes a deep dive into the Triangle’s real estate markets. That includes stories on what’s happening in the Triangle’s residential market, and, like today, the commercial real estate market.
RALEIGH – Office towers and residential – from homes to apartments – dominate headlines about Triangle real estate. But don’t forget warehouses, which are a reflection of growing businesses. Yes, industrial warehouse space remains in high demand, and that’s pushing more developers to pursue speculative and build-to-suit projects across the region.
That’s according to the latest report on the Triangle’s industrial real estate market from CBRE|Raleigh.
“The Triangle industrial market had a strong end to 2022 which leaves it in a good position to weather any potential economic slowdown this year,” said Dodson Schenck, managing director of industrial and logistics services at CBRE|Raleigh. “The robust construction pipeline will bring much needed opportunities for tenants looking to maximize their supply chain resilience this year.”
Still, warehouse vacancy increased in the fourth quarter, and is now 2.7%. And flex vacancy increased slightly in the fourth quarter, as well, to 8.4%.
Despite the rise in vacancy, rental rates increased, which signals that there continues to be high levels of demand across the region. At the end of the quarter, the warehouse rate was $7.60 per square foot on a triple net lease and a flex rate of $17.52 per square foot on a triple net lease.
A triple net lease, often abbreviated NNN, is a lease agreement on a property whereby the tenant agrees to pay all the expenses of the property, including real estate taxes, building insurance, and maintenance.
“A solid fourth-quarter performance capped a stellar year for Raleigh-Durham’s industrial market,” the CBRE|Raleigh report reads. “Demand remains strong as companies look to ensure supply chain resilience and maximize efficiencies by upgrading to modern facilities near points of consumption.”
The rising price of land throughout the center of the Triangle has pushed commercial development in the region’s outlying communities.
According to the latest CBRE|Report, Johnston County is the area of the Triangle where there is the most current construction activity, with 1.1 million square feet of industrial space underway.
But industrial space is not just in demand in Johnston County. The entire region “is benefiting from a nationwide resurgence in manufacturing as companies strive to diversify supply chains,” the report notes.
And more industrial space could be in demand, especially in places like Chatham County, where VinFast and Wolfspeed are constructing massive infrastructure projects.
Though VinFast did recently confirm that the Vietnamese automaker had cut 60 U.S.-based jobs, a spokesperson for the company told WRAL TechWire this week that the consolidation of the North American team would not affect the construction of or timeline for the $4 billion electric vehicle assembly manufacturing facility in Chatham County.
“They are on pace and no changes to the VinFast manufacturing team we are working with,” said Michael Smith, president of the Chatham Economic Development Corporation, in an interview with WRAL TechWire about the VinFast project. “They are continuing to work fast here in Chatham County at the Moncure site.”
All told, the report concludes that the region’s industrial real estate market is “in a strong position to weather the impacts of a potential economic slowdown in 2023.”
WRAL TechWire reporter Jason Parker, who is also a licensed North Carolina real estate agent, works with journalists from WRAL.com to track and present market data and report on how people are experiencing the region’s changing real estate markets. These special reports will use the category tag “Triangle Real Estate” or “Triangle Real Estate Market.