Q4 2022 Industrial Real Estate Report: Charlotte, NC
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
Charlotte is a notable hub of economic activity, experiencing strong population growth in recent years and hosting numerous Fortune 1000 companies.
The city’s unemployment rate was constant quarter-over-quarter: The rate sat at 3.1%, lower than the national average of 3.5% in Q4 2022.
From 2022 to 2023, its metro population increased by 2.86% year-to-date.
In Q4 2022, absorption increased, the city’s construction pipeline grew, and rental rates rose for Charlotte industrial real estate.
General Area Overview & Demographics
Charlotte, North Carolina, has a population of 879,709 people. 49.7% of the population identify as White, 33.4% as Black or African-American, 11.2% as Hispanic or Latino, and 5.7% as Asian.
Charlotte, NC Median Household Income, Education, & Climate
The median household income in Charlotte is $63,805. This is higher than the national average of $57,652. In addition, the poverty rate in Charlotte is 16.5%, lower than the national poverty rate of 17.3%.
Its resident’s average age is 34.3 years old, somewhat lower than the national median of 37.9 years old. The highest population falls within the 25-44 age group, making up 27.2% of Charlotte’s population.
The University of North Carolina at Charlotte is the largest in the city, with over 30,000 students. Johnson C. Smith University and Central Piedmont Community College have campuses in the Charlotte area.
Charlotte has a thriving business and industrial sector, with various industries, including finance, energy, health care, technology, and logistics. The city is the second-largest banking center in the country after New York City, with Bank of America headquartered in Charlotte.
The city has a humid subtropical climate, mild winters, and hot summers. The average temperature in Charlotte ranges from 40°F in the winter months to 84°F in the summer months. Charlotte also experiences an average of 45 inches of precipitation annually.
Summary of Charlotte Industrial Real Estate Performance in Q4 2022
Overall industrial vacancy in Charlotte slightly rose from 3.7% in Q3 to 3.87% in Q4.
Vacancy in Rowan County was 13.3%, the highest of all submarkets. No other submarket had a rate above 10%.
Union County was the lowest, with a rate of 0.4%. Only Northwest and Catawba County posted rates below 2%.
The fourth quarter posted 2.3 million square feet absorbed. Warehouse space accounted for 100% of that absorption, as flex space totaled -2,500 square feet for the quarter.
What are industrial rents like in Charlotte?
In the fourth quarter, industrial real estate rents in Charlotte averaged $7.95 per square foot. This was a quarter-over-quarter increase of $0.20 and one of the most expensive industrial rental rates in the country.
Average rents were highest in the Airport/West submarket at $9.95, while Catawba County was lowest at $4.31
The Central CBD, East, North, and South submarkets posted average industrial rents above $9.
Averaged across all submarket, flex space rent was nearly double warehouse space rent.
Purchase & Leasing Activity
Sales activity declined from Q3 of 2022 due to rising interest rates and economic uncertainty.
Average sales price for industrial space was $156.20 per square foot in Q4 2022.
Leasing activity totaled 3.1 million square feet in Q4 2022, a significant drop from Q4 of 2021, which saw nearly 6 million square feet of leasing activity.
The majority of leasing activity was for new leases.
Notable Industrial Real Estate Deals in Charlotte in Q4 2022
There were several deals for Charlotte’s industrial real estate.
- Lincoln Property Company purchased 626,000 square feet for $81 million.
- Bank of America purchased 563,000 square feet for $76.4 million.
- Shutterfly leased about 303,000 square feet.
- Brewer Supply leased about 150,000 square feet.
These are select examples among other activity.
New Industrial Real Estate Development Activity in Charlotte in Q4 2022
In Q4 2022, 1.3 million square feet of new product was delivered. This was an overall decline from last quarter, as Q3 2022 delivered 1.6 million square feet.
Deliveries totaled 8.5 million square feet by the close of 2022. York County received over 2 million of that number.
The construction pipeline increased quarter-over-quarter in Q4, going from 13 million to 17 million square feet under construction.
Gaston County accounts for 3.4 million of what’s currently in the pipeline.
Market Forecast for Charlotte’s Industrial Real Estate Market
Interest rates and economic uncertainty could reduce demand for Charlotte industrial real estate in 2023.
Even with healthy demand, vacancies will likely increase as more properties come online.
Despite higher costs, the relative value offered by Charlotte’s growing population and strong labor market will likely ensure continued consumer interest.
Takeaways for Industrial Real Estate Investors
All industrial real estate markets have felt the impact of increasing interest rates and economic headwinds. Despite these factors, Charlotte remains positioned to perform well in 2023.
Do your due diligence and invest wisely.
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