SOUTHEAST SNAPSHOT, DECEMBER 2007

Raleigh Industrial Market

There has been very little speculative industrial development in the Raleigh/Durham area during the last 5 to 7 years, as the market vacancy rate soared to 33 percent after the tech fallout. Vacancy rates have dropped below 10 percent due to few properties being added to the market. Rates have escalated to the mid to upper $4 per square foot NNN range due to dwindling supply, and lack of available industrial sites.

The only major project that has been announced is Liberty Property Trust purchasing 536,000 square feet in Keystone Business Park. This is significant, in that it brings another large, well capitalized, player to the market.

Two other developers are rumored to be close to major land purchases for speculative industrial development. One in southeast Wake County, and the other in Johnston County to the east.

The tenant mix is mostly distribution, but with buildings designed to accommodate the 20,000 square feet user and larger.

Amerisource Bergen leased the entire 164,000 square feet at 120 Transair Drive in Morrisville. Hallmark Cards leased more than 200,000 square feet in the former Winn-Dixie Distribution Building in Clayton.

The rental rate is $4.50 per square foot NNN to $4.95 per square foot NNN. The vacancy rate is below 10 percent. Different surveys have different numbers, with the high end being 14 percent and the low end being 8 percent. The general consensus is that the rate is below 10 percent.

Southeast Raleigh and Johnston County appear to be the favored industrial corridors. Land availability, good road access, and available labor sources, will continue to make this the most attractive area for industrial development.

The market continues to be active, with several users with more than 100,000 square feet searching for locations.

— W. Michael Lewis, CCIM,SIOR is president of The Lewis Group/CORFAC International in Raleigh, North Carolina.

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