Best of 2021 - CLT as an Industrial Hub

In my?first newsletter of 2020, I wrote about all the Sprinter Vans zooming around town making deliveries. I called them the unsung hero of 21st-century shopping. Little did I know at the time just how important and essential these delivery vans were about to become for our daily lives.

The pandemic certainly boosted demand for delivery services of all kinds. My economic developer pal and former Charlotte Regional Partnership exec, Ronnie Bryant, recently told a reporter that thanks to the pandemic and the resulting boom in online shopping, “Charlotte is now on track to become the distribution/warehouse hub it’s always wanted to be.”

Really??With low paying jobs and a low tax base, it always appeared to me that industrial was a low priority for city planners. What changed?

This?article?shows how significantly the pandemic changed consumer behavior, as consumers raced to adopt digital commerce. According to the report, global digital sales grew 36% year-over-year in Cyber Week alone, with shoppers spending $270 billion during the week. The writer says that ten years of accelerated e-commerce adoption occurred during just a few months of 2020.

Without a doubt, Charlotte has been growing its industrial and distribution markets. Amazon has occupied over 3MSF over the past three years, and it, along with FedEx, UPS and Staples, use Charlotte as a regional hub.

However, the truth is Charlotte will never be a national distribution hub.

As for why that is, the answer is complicated. Factors such as miles to the population around the country, national supply chains, proximity to ports, the Appalachian mountains, and existing major hubs in places such as Atlanta, New Jersey, Memphis, Dallas, and Chicago all affect Charlotte’s ranking.

Sorry, Mayor Lyles – but you cannot tout Charlotte’s industrial prowess on your airport public announcement. BTW, can you play it slightly less often? I hear it in my sleep.

What Charlotte can aspire to be is a?significant regional hub, serving the fast-growing metropolitan areas in the Mid-Atlantic states. Not a consolation prize, by any stretch.

With the crucial I-85 corridor in our area, Charlotte could be the hub serving Charleston, the Triangle, Asheboro, Columbia, and Greenville, SC. Route I-77 serves Midwestern markets of Ohio, Illinois, and Michigan, providing more opportunity.

With Charlotte being in the midst of an unprecedented economic expansion that’s lasted 12 years, and with the banks in decent shape and economic stimulus still flowing freely, expect consumers to keep shopping. And this means great things to come for Charlotte’s manufacturing and distribution markets.

CoStar reports that the Charlotte warehouse investment sale market is among the?hottest in the nation. Since 2010, industrial properties have more than doubled in terms of pricing per SF, and sales volume now regularly surpasses the $1 billion threshold. I expect that after the spike of deliveries planned for 2021, the construction will settle down to approximately 1,000,000 SF per year, slowly increasing vacancies towards 10% and rent growth stabilizing.

As a result, industrial will go back to being the boring segment of the real estate market by 2023.

The Charlotte industrial market is confusing to many, but it doesn’t have to be. For 25 years, Cardinal has been helping occupiers and investors find deals and solve sticky real estate problems. Do you want to explore how Cardinal can save you time and money? Call John on his cell at 704-501-7273.