In 2014, major investors--such as LCR, buyer of the former Continental Tire HQ--will remain bullish on Charlotte industrial properties, PPR’s Charlotte-based economist Kyle Merville tells us. (At first we were skeptical of his predictions because he didn't know who will win The Voice, but we'll give it a shot.) Here are some reasons why:
1) Demand is there.
Demand has grown during the past three years, and Charlotte investors can expect that to continue with an improving national economy, Kyle says. (Not only that, the buzz is back, bringing with them strong demand for warehousing all the new Charlotte Hornets gear). Also, Charlotte's regional warehouse market will show further signs of improvement as homebuilders finish their suburban communities and retailers expand to serve their customers in the Piedmont. Metro Charlotte vacancies are currently at 7.9%, and gently falling, with limited supply in the pipeline.
2) Supply isn't there (yet).
Almost nothing is under construction in the metro area, Kyle says. (All the cranes must've flown south for the recession.) There's been a steady decrease in supply (3.6M SF) to more than offset the 2.5M SF of deliveries since 2008. Eventually, development will ramp up--nearly 4M SF is on the drawing boards--but it's going to take a while. Locally, smaller warehousing in South End and NoDa is shifting to State Line and Airport locations, as warehouses make way for new apartments and offices. Increasing the attraction of those submarkets is Norfolk Southern's new intermodal yard at Charlotte Douglas, replacing the congested yard in NoDa (pictured: the new intermodal site, whose completion will be next year).
3) Rents are still growing.
With pending construction on the horizon, the recent high rent growth seen in Q3 will come back down to Earth. But even so, rents will continue upward somewhat, Kyle predicts. Favorable market fundamentals have attracted institutional investors, especially in the State Line submarket. Overall prices are still low relative to historic norms, providing opportunities for investors.
