Editor’s Note: This WRAL TechWire’s Commercial Real Estate special report “Follow the Numbers” is supported by commercial real estate firm CBRE Raleigh.


RALEIGH – Unlike its softer office counterpart, the market for Triangle industrial real estate remains firm – kicking off the first quarter 2023 with positive net absorption of more than 862,000 sq.-ft. Delivery of new product accounted for a rise in vacancy rates to 4.5 percent, up 240 basis points (or 2.4 percentage points) from the record-low vacancy of Q1 2022.

Industrial properties range from cold storage spaces to manufacturing facilities. The segment also includes flex space, the low-rise buildings that can house assembly, warehouse and office operations, as well as customer showrooms.

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“What’s really boomed in our market lately is warehouse/distribution space,” says Elizabeth Gates, senior research analyst at CBRE|Raleigh, which tracks and reports quarterly data on commercial and industrial real estate market conditions.  Demand for warehousing and distribution properties is coming largely from e-commerce fulfillment operations. “That started before COVID-19 — but post-pandemic, it just took off,” Gates says. Also fueling the growth of distribution space is a shift in corporate America away from a national distribution framework to more local and regional fulfillment models that can move product into the hands of customers more quickly, according to Gates.

The return to more “normal” consumer behavior now that the pandemic has subsided has not resulted in reduced digital retailing, the U.S. Census Bureau reports. In fact, online spending rose by 11.3 percent in 2022, suggesting demand for e-commerce fulfillment centers may remain firm for a while. That translates to higher tenant rents. In Q1 2023, average asking rents for warehouse space increased to $8.54 per sq.-ft, up 12.8 percent from Q1 2022. Flex space saw a more modest increase, rising 8.5 percent over the year to an average of $16.14.

Relief for tenants may be on the way. Construction projects currently underway will deliver more than 4.6 million sq.-ft. of space to the region’s industrial real estate market. “A substantial amount of new product is being added to the market, and that is a good thing,” Gates says. Despite the rise in vacancy rates, “they remain incredibly low. “More space is being added, and that’s positive for tenants,” she says. For now, “it’s still a landlord’s market.”

While the lion’s share of new space will be in the core markets in Durham, Orange and Wake counties, nearly 1.7 million sq.-ft. of the new product is set for delivery in “outlying” markets like Chatham, Johnston and Lee counties. “That is a trend worth noting,” says Gates. “We’re starting to see more and more growth in our outlying counties.”

As tech firms tap the brakes, data suggest softening demand for Triangle office property


CBRE|Raleigh, a joint venture between local principals and Dallas-based CBRE Group, Inc. [NYSE: CBRE], is the leading commercial real estate services firm in the Raleigh-Durham market, providing portfolio management, sales and leasing service, consulting expertise and other services. Its gathers industrial real estate data for eight Triangle counties. Not included in its analysis are biomanufacturing, medical and life science facilities, as well as government-owned properties, all of which the company tracks separately.

Scarcities of industrial-zoned lands in the region’s urban core have led to higher prices. Outlying communities offer developers more affordability. Investments in transportation infrastructure and water and wastewater capacity have made once-rural areas appealing for advanced industrial operations. Johnston County, for example, currently has nearly 1.5 million sq.-feet of industrial space under construction. Near Smithfield,  AdvanceTEC recently completed a $10 million investment in cleanroom space. The building also features approximately 63,000 sq.-feet of traditional warehouse/distribution space that is available for lease. Headquartered in Richmond, Va., AdvanceTEC serves clients in the biotech, nanotech and cleantech industries, and its expertise can be found in government, military, university and corporate facilities. The privately held firm has successfully constructed facilities for research, pilot production and high-volume manufacturing applications.

Major industrial operations have found their way to Chatham, Johnston and Lee counties in recent years. “The farther you go out the better pricing you’ll find for land,” says Ann-Stewart Patterson, executive vice president for CBRE|Raleigh. “Those counties are also putting a lot of money into infrastructure to support growth,” Patterson says.

In some cases, county economic development leaders are working closely with private developers to ready more Class A industrial space for the market. A partnership between Greensboro-based Samet Corporation and Sanford Area Growth Alliance, which oversees business recruitment and expansion in Lee County and the City of Sanford, resulted in the construction of four industrial shell buildings at Central Carolina Enterprise Park. Shell buildings include features such as foundation, doors, windows, footers and roofing, but leave flexibility for end-users to upfit interiors to meet the specifications of their operations.

“Our focus on buildings has set us apart from some of the competition,” says Jimmy Randolph, chief executive officer for the Sanford Area Growth Alliance. A unique feature of the partnership involves the city and county agreeing to lease the spec buildings for up to two years upon their delivery if a tenant has not been secured. The provision helps the private developer manage its risks and even secure more agreeable financing terms from lenders. In return, Randolph and local leaders get to influence the types of industries that will operate at the park – typically manufacturers and other higher-wage employers whose presence can help move the needle on the local economy. “We as a community felt it was important that we had some say in who the tenant would be,” Randolph says.

Since implementing its partnership with Samet, four buildings have been sold or leased to arriving employers. Last June, Astellas Gene Therapy opened a $100 million manufacturing plant at one of the park’s 135,000-sq.-ft. buildings. The Japanese company intends to employ more than 200 people there at average salaries that are more than twice Lee County’s overall average. Also significant is that nearby counties have adopted the model to incentivize speculative industrial real estate. “At the time, it was the first partnership of its kind in the region,” Randolph says. Johnston County leaders, for example, have replicated the approach with AdvanceTEC and other recent real estate partners.

Part three: What will it take to get employees back in the office?


This editorial package was produced with funding support from CBRE Raleigh.  WRAL TechWire retains full editorial control of all content.