SOUTHEAST SNAPSHOT, AUGUST 2005

Raleigh-Durham Industrial Market

John Kerr Senior Vice President York Properties/ TCN Worldwide

The sale of the Research Tri Center in the Research Triangle Park (RTP) submarket and subsequent spin off of several buildings from this transaction has been a significant development in the area. Chicago-based Transwestern Investment Company purchased the property, marking it as a significant new owner in the market.

Development activity has continued on the east side of Raleigh, as the area has become a center for distribution and light manufacturing. Both Walnut Creek, under development by Duke Realty Corporation, and Greenfield, a project by Craig Davis Properties, are examples of large industrial developments in this flourishing area. Walnut Creek, specifically, is a more mature site and has had success constructing buildings to lease and selling sites building to suit for owners/users such as Morrisette Paper Company, Harris Wholesale and Dillon Supply Company.

In addition to the east side of Raleigh, most of the new industrial development in the Raleigh-Durham market is taking place in the Garner/East Raleigh and the Capital Boulevard submarkets. The cost of land is cheaper in these areas, and the labor pool for manufacturing and distribution/warehouse jobs is deeper than on the west side of Raleigh and toward the RTP. However, while the majority of new development is cropping up in the aforementioned areas, redevelopment and repositioning are common endeavors in the RTP.

Most of the large deals that recently have occurred have been sales transactions or build-to-suits. Companies that have absorbed this space include Silver Line, adding 175,000 square feet; Harris Wholesale, absorbing 180,000 square feet; Long Beverage, constructing 100,000 square feet; and Dillon Supply, moving into 200,000 square feet.

Several major leases have closed in Raleigh-Durham as well. On the flourishing east side of Raleigh, both Bradco Supply and Trane have signed leases for 60,000 square feet. In addition, Stock Building Supply has leased 130,000 square feet on the south side of the market, Champagne Logistics is prepared to occupy 60,000 square feet in the RTP, and Induspac has signed an expansion lease for 100,000 square feet on the west side.

Small to medium size users (tenants absorbing 10,000 square feet to 30,000 square feet) currently are active in the market while spaces are becoming more scarce. However, large users still will receive solid rate and incentive quotes from landlords. Other events to keep an eye on would be a potentially significant deal involving Parker Lincoln, a large industrial owner in the market, which has considered selling its portfolio. The buyer of this space would undoubtedly bring a new, large player to the market.

Overall, the RTP submarket remains the largest industrial sector and it should continue to be the best barometer to a recovery in the overall market for the future.

— John Kerr, senior vice president, York Properties/TCN Worldwide

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