COVER STORY, DECEMBER 2011

MAIN STREET OF THE CAROLINAS?
Interstate 85 continues to see strong growth.
Savannah Duncan

A rendering of TD Bank’s $17.1 million, 300,000-square-foot renovation and expansion, which will begin in early 2012 in Greenville, South Carolina. Courtesy of TD Bank.

In early 2012, TD Bank will begin a $17.1 million renovation of three buildings for a 300,000-square-foot expansion of its corporate offices, located at Carolina Point Parkway and Interstate 85 in Greenville, South Carolina. The bank’s campus is expected to create more than 1,600 jobs during the next 5 years. TD Bank is just one of many companies who have chosen to locate near Interstate 85 in the Carolinas.

Interstate 85 is one of the strongest growth corridors for commercial real estate in the Southeast. Running southwest from Petersburg, Virginia, to Montgomery, Alabama, the road connects several large cities in the Southeast. Especially for the Carolinas, where Interstate 85 runs for 233 of its 668-mile length, it is a prime location for a variety of real estate sectors.

“We have a very diverse amount of industry along Interstate 85,” says Jeff Edge, senior vice president of economic development at the Charlotte Chamber of Commerce. “It has become the main street of the South.” 

Interstate 85 starts on the south end in Montgomery, Alabama, at an interchange with Interstate 65. From there, the highway runs through Atlanta and into the Carolinas, passing through cities such as Greenville and Spartanburg, South Carolina, and Charlotte, Greensboro and Durham, North Carolina, before ending at its interchange with Interstate 95 south of Richmond, Virginia.

In addition to Interstate 85 being a major transportation corridor, factors such as a professional business climate, skilled work force and low cost of living make it a prime location for commercial real estate in the Carolinas, says Darren Wood, partner of Charlotte-based The Providence Group of the Carolinas.

Distribution & Manufacturing

Economic development initiatives try to foster growth in cities along the corridor by offering incentives, but there are no specific benefits in place for locating along Interstate 85.

National companies, such as General Electric and Hubbell Lighting, have properties along the corridor in Greenville. Additionally, BMW’s U.S. manufacturing facilities, as well as Michelin’s U.S. headquarters, are both located adjacent to Interstate 85 in Greenville.

Greenville has been a popular choice for distribution and manufacturing facilities for companies that utilize the Port of Charleston. Although the port is directly accessed by the upstate area via Interstates 26 and 385, 80 percent of the goods that come in through the Port of Charleston end up along the Interstate 85 corridor, adds Laurens Nicholson, managing principal of Lee & Associates’ Greenville office.

“BMW is the largest [export] user of South Carolina’s ports,” says Hunter Garrett, principal and broker at NAI Earle Furman’s Greenville office. BMW imports parts for manufacturing, as well as exports finished products overseas, he adds.

In North Carolina, each of the large metro areas have thrived in different, yet related, fields. “The three metro areas in North Carolina really complement each other,” says Dan Lynch, president of the Greensboro Economic Development Alliance. “There is research and development in the Raleigh/Durham area; back office and manufacturing in the Greensboro/Winston-Salem area; and Charlotte has the finance side and corporate headquarters.”

In January 2012, the $64 million, 88,000-square-foot Joint School of Nanoscience & Nanoengineering, a collaboration between N.C. A&T State University and The University of North Carolina at Greensboro, will open at Gateway University Research Park in Greensboro.

One selling point for North Carolina is that cities such as Durham and Charlotte offer easy access to major airports as well as rail lines.

“Interstate 85 provides a great connection to get to the Charlotte Douglas International Airport,” Edge says. “One of the advantages Charlotte has is the accessibility of our airport.”

Kevin Dick, director of the Office of Economic and Workforce Development for the City of Durham, adds that Raleigh/Durham International Airport is approximately 10 miles southeast of Durham and 10 miles northwest of Raleigh, off Interstate 40. Additionally, a rail line runs through the city, which connects passengers and freight to major markets in the Southeast, such as Richmond and Washington, D.C.

“From Durham, you can reach 65 percent of the United States population within a 12-hour drive,” Dick says.

Cabarrus County, just north of Charlotte, has such high traffic on Interstate 85 that the North Carolina Department of Transportation is widening 6.8 miles of Interstate 85, between Exit 49 to Exit 55, from four lanes to eight. Lane Construction is the contractor for the project, which is projected to cost an estimated $125 million and is slated for completion in November 2013.

“Completing this project will mean quicker, safer travel for travelers accessing businesses along Interstate 85,” says Jen Thompson, communications officer for the North Carolina Department of Transportation. “One innovation the contractor proposed was to build a temporary work bridge with ramps on each side, which will allow heavy equipment to access the median without impacting traffic on Interstate 85.”

Impact on Other Property Types

As a result of strength of the office and industrial sectors along Interstate 85, the multifamily and retail sectors have started to experience some growth as well. The ALDI grocery store chain, one of Wood’s clients, is expanding exclusively in the Interstate 85 corridor between Greenville and Raleigh, with one exception.

Another thriving property type is multifamily. Although there has not been a significant amount of multifamily development directly along the corridor, there is pent-up demand says Steve Smith, executive vice president and managing principal of CBRE’s Greenville, South Carolina, office.

 “As demand continues to increase, there will be more Class A multifamily sites being acquired by developers along the corridor,” Smith says. 

Although there are no specific incentives offered to companies considering locating along the Interstate 85 corridor, each city, county or state has economic development initiatives that can apply.

Fostering growth

In Durham, Dick says there are a variety of incentives in place from small business grants to major property investment incentives that encourage public/private partnerships. Additionally, his office works with the Greater Durham Chamber of Commerce, Downtown Durham Inc., The Research Triangle Regional Partnership and the state of North Carolina to foster growth in the Raleigh/Durham area. Many of the incentives are related to job creation, Garrett says.

Many economic development initiatives work together to foster growth in a city or region. “We all understand the value of regionalism and how that can drive deals to your area,” Lynch says. “Even though you might not get every deal, the fact that it’s landing somewhere in the region is good for everyone.”

Emil Malizia, professor and chair at the University of North Carolina at Chapel Hill’s Department of City and Regional Planning, says in North Carolina there are seven regional partnerships that are multi-county entities that work together to market their area.

Despite the strength of the corridor, there has been a lack of new development during the past couple of years. In the 1960s and 70s, many of the companies located along Interstate 85 in the Carolinas were related to the textile industry. Because of the shift of that industry overseas, many facilities are redevelopments of older buildings.

For example, in August Griffin Thermal Products purchased the 330,000-square-foot former Delta Mills Estes Plant in Piedmont, South Carolina, approximately 1.5 miles from the intersection of Interstate 85 and the Southern Connector. The company made a multi-million dollar investment to redevelop the former yarn and weaving plant into a manufacturing facility to make automotive and industrial thermal transfer products. 

“There are developers in this area that have shown me information that would suggest that in different times, they would have had a number of financial institutions wanting to provide debt for projects,” Malizia says. “There might be opportunities in this corridor for commercial real estate development that won’t be realized because of the funding climate.”

Nicholson adds that in Greenville, delivery of new buildings is the lowest it has been since the 1980s. Looking ahead, he anticipates that current vacancies at warehouse distribution facilities will be filled by 2014, which will further increase manufacturing and distribution growth.

Despite the continued strength of the market, stabilization of the economy would help continue foster growth of commercial real estate along the corridor, Lynch says. “Markets don’t like uncertainty, they like stability,” he adds. “As we enter the next 12 to 18 months, I hope we’ll have more clarity in the marketplace and companies will feel more comfortable spending some of those dollars that have been sitting on the sidelines.”

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