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Accelerating success.

Raleigh-Durham’s industrial market continues to thrive. The area’s astounding population growth is fueling an explosion in e-commerce activity and subsequently, distribution space for national occupiers. Despite a robust development pipeline, vacancy is at a historical low, which evidences the substantial pre-leasing that has occurred in 2021 thus far.

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Absorption Deliveries Vacancy

LeaseJ&K Cabinetry

3071 Business Park Dr East Wake / 100k SF

Sale4357 S Alston Ave

RTP/I-40$213 PSF

SaleWeck Dr Portfolio

RTP/I-40$82 PSF

SaleWoodlake Center

RTP/I-40$113 PSF

LeaseBluesky Solutions

2201 S Wilmington St East Wake / 169k SF

LeaseAmazon

Freedom Business Park East Wake / 129k SF

YOY

FORECAST

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Industrial

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4.77%Unemployment Rate

1.47%U.S. 10 Year Treasury Note

13.82%GDP - Quarterly % change yr/yr

Warehouse 20Q2 21Q1 21Q2

Total Inventory 62,023,932 63,037,162 63,381,162

QTD Deliveries 560,000 - 344,000

Net Absorption 265,170 (643,889) 501,188

Overall Vacancy 2.8% 3.5% 3.1%

Under Construction 4,098,839 910,854 1,145,700

Overall Market Rent $6.08 $6.53 $7.31

Abso

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Vacancy Rate

Market OverviewRaleigh-Durham’s industrial market boom continued in Q2 2021. The explosion of e-commerce in tandem with few deliveries is resulting in further constriction of available market inventory. As a result, throughout the quarter, there was a noteworthy increase in land sales closed with the intention of the buyer creating new industrial or flex product. The size of speculative buildings is trending upward and geographically, these new developments are being pushed further out of the historical ‘core submarkets’ (RTP/I-40 and East Wake). The bulk of Q2 investment transactions closed in the RTP/I-40 submarket; however, the East Wake submarket was the hotspot for industrial land transactions. Throughout the quarter, Baltimore-based Merritt Properties acquired land in Knightdale for Merritt Midway Business Park and local developer Wigeon Capital acquired additional land at 200 Laurensfield Court for an additional building at their proposed industrial and flex park.

Market GraphHistoric Comparison

Vacancy Rate

4.3%Net Absorption

770k SF

Overall Warehouse Asking Lease Rates

$7.31/SF

Under Construction

1.78M SF

Key Takeaways• Rental rates have soared to an average of $7.31

• Average building and tenant sizes are growing due to the increasing logistical significance of the Raleigh-Durham area

• Vacancy rates dipped to an average of 3.1% across all submarkets, evidencing a significant amount of preleasing that occurred in speculative developments through the end of Q1 2021

Notable Transactions

Colliers | Raleigh-Durham | 21Q2 | Industrial Report

IndustrialRa

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21Q2Capital Markets

Persistent investor demand for industrial assets of all sizes and classes continued in the Triangle during Q2. As seen on a national basis, demand continues to outpace supply, resulting in sustained cap rate compression. Much in line with other asset types in the Triangle, the industrial sector saw primarily out-of-state buyers investing in the Triangle from out-of-state sellers. New York-based DRA Advisors recently closed on a portfolio of four industrial assets: two in Charlotte, and 2710 and 2910 Weck Drive in Raleigh. The 870k SF portfolio closed for the highest price tag of the year thus far: $71 million, or nearly $82 PSF. Just two weeks prior, Boston-based Eaton Vance acquired the FedEx Ground distribution facility at 4357 S Alston Avenue for $50.5 million, or $213 PSF. Back in May, Bethesda-based ASB Capital acquired 1000 and 1200 Innovation Avenue in Morrisville for $45 million, or roughly $140 PSF. All these assets are in the RTP/I-40 submarket.    

Q2 2021 Forecast

As the Southeast continues to thrive ‘post pandemic’, foreign and domestic capital will continue to see Raleigh/Durham as a logical market to invest in. Demographic shifts paired with the compressing cap rates in the market will attract new-to-market institutional investors and developers. The significant leasing activity in the first half of the year will lead to record-breaking per square foot numbers as a few significant industrial parks come to 100% leased.

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Durham Raleigh

Unemployment

Professional & Business Services GovernmentTrade, Transportation, & Utilities Education & Health ServicesLeisure & Hospitality Mining, Logging & Construction

Top Industries

The Economy

Q2 saw an overall continued recovery from the COVID-19 pandemic’s impact on the local, national, and global economy as vaccination rollouts continue. By the end of the second quarter, over half of all Triangle residents have been fully vaccinated according to the NC Department of Health and Human Services. Unemployment numbers have continued to drop, with North Carolina ending the quarter with a lower overall unemployment rate in comparison to the national average; 4.6% unemployed versus 5.9%, respectively. The Triangle is projected to see a net growth of nearly 100k jobs by 2028 according to the North Carolina Department of Commerce, with one of the most rapidly growing sectors being trade, transportation, and utilities (with a year-over-year percentage change of over 10% as of the end of the quarter), which is not surprising given the already regular announcements of employers either relocating or expanding into the region.

Colliers | Raleigh-Durham | 21Q2 | Industrial Report

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21Q2

Name Submarket Address RBA Type Status Delivery(Expected) Owner/Developer

6890 Konica Dr I-40/I-85 Corridor 6890 Konica Dr 478,500 Industrial Under Construction Q3 2021 Intersect Development

Group

Merritt TW Crossing Bldg 2 RTP/I-40 3252 S Miami Blvd 91,170 Flex Under Construction Q3 2021 Merritt Properties

Merrritt TW Crossing Bldg 3 RTP/I-40 3260 S Miami Blvd 38,320 Flex Under Construction Q3 2021 Merritt Properties

Peak City Business Park Bldg 7 Eastern Wake 2300 Energy Dr 60,000 Flex Under Construction Q4 2021 GreenHawk Corporation

Research Triangle Logistics Park I-40/I-85 Corridor Old NC Highway 86 2,400,000 Industrial Proposed Q3 2022 Barrister Commercial Group

Buckhorn Industrial Park I-40/I-85 Corridor Buckhorn Rd 580,000 Industrial Under Construction Q1 2022 Al. Neyer

Patriot Park Bldg 5 RTP/I-40 125 National Way 200,055 Industrial Proposed Q1 2022 Strategic Capital Partners

Total to be Delivered:2021 667,990 SF2022+ 3,180,055 SF

Buckhorn I-40/I-85580,000 SF IndustrialAl.Neyer

6890 Konica Dr I-40/I-85478,500 SF IndustrialIntersect

Merrit TW Crossing Bldg 3RTP/I-40 38,320 SFFlex Merritt Properties

Patriot Park Bldg 5RTP/I-40 200,055Industrial Strategic Capital Partners

2020 2022+Q3 2021 Q4 2021 Q1 2022 Q2 2022 BEYOND

Merrit TW Crossing Bldg 2RTP/I-40 91,170 SF Flex Merritt Properties

Peak City Bldg 7Eastern Wake 60,000 SF Flex GreenHawk

Research Triangle Logistics Park I-40/I-852,400,000 IndustrialBarrister

Warehouse Underway by Submarket

RTP/I-40 East Wake I-40/I-85 Corridor Southwest Wake

Development Pipeline

ConstructionAs the Triangle market becomes more land-constrained, developers will be forced to look further outside of core submarkets in order to take advantage of the strong market fundamentals. Assuming developers pick up on this emerging trend, under construction numbers should trend slightly below 1MSF per quarter the back half of 2021. Despite the increase in construction prices across the country, compressing cap rates and increasing rental rates justify the risk to build. Highlights of this quarter’s under construction numbers include Al. Neyer’s Buckhorn Industrial Park in Mebane, NC on the I-40/85 corridor, Trinity Partner’s Alexander Commerce Park Project in Durham, and Beacon Partner’s speculative development at Beacon Commerce Park in Garner.

Warehouse Construction Underway by Submarket

Warehouse Underway by Submarket

RTP/I-40 East Wake I-40/I-85 Corridor Southwest Wake

Colliers | Raleigh-Durham | 21Q2 | Industrial Report

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Copyright © 2021 ColliersThe information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

Top Industrial Submarkets Space Type Inventory (SF) Vacant SF

Vacancy Rate (%)

Availability Rate (%)

Asking NNN Rental Rate ($)

Quarterly Net Absorption

Under Construction

RTP/I-40 Industrial 17,794,390 32,336 0.2% 0.6% $6.28 604,341 50,000

East Wake Industrial 19,468,120 260,230 1.3% 3.4% $6.29 530,081 610,446

I-40/I-85 Corridor Industrial 2,020,989 - 0.0% 24.0% $4.90 - 475,910

Raleigh-Durham | Q2 2021 | Industrial | Market Statistics

Submarket Space Type Inventory (SF) Vacant SF Vacancy Rate

(%) Availability

Rate (%)Asking NNN

Rental Rate ($) Quarterly Net

AbsorptionUnder

Construction

70/Glenwood Flex 349,886 2,784 0.8% 0.8% $13.34 - -

Cary Flex 819,629 7,568 0.9% 1.6% $12.82 18,575 -

Central Durham Flex 74,387 - - - - - -

East Wake Flex 3,041,459 169,477 5.6% 7.4% $12.33 13,080 51,635

Falls of Neuse Flex 407,694 12,635 3.1% 3.9% - (1,330) -

North Durham Flex 672,003 136,926 20.4% 6.0% $19.95 - -

RTP/I-40 Flex 10,743,179 672,259 6.3% 13.1% $19.23 187,572 486,590

Southwest Wake Flex 1,591,824 74,757 4.7% 7.8% $16.22 29,428 96,000

US-1/Capital Blvd Flex 2,389,490 155,411 6.5% 6.8% $13.69 22,012 -

West Raleigh Flex 700,940 4,800 0.7% 2.4% $11.97 - -

Flex Totals 20,790,491 1,236,617 5.4% 5.5% $14.59 269,337 634,225

Submarket Space Type Inventory (SF) Vacant SF Vacancy Rate

(%) Availability

Rate (%)Asking NNN

Rental Rate ($) Quarterly Net

AbsorptionUnder

Construction

70/Glenwood Industrial 1,805,384 43,225 2.4% 0.9% $6.33 7,602 -

Cary Industrial 2,350,355 9,892 0.4% 12.2% - 34,841 -

Central Durham Industrial 932,021 - - - $5.50 7,334 -

East Wake Industrial 19,857,578 260,230 1.3% 3.3% $6.29 407,273 746,900

Falls of Neuse Industrial 2,586,571 99,339 3.8% 3.2% $8.16 9,760 -

North Durham Industrial 3,505,084 - - 4.6% $5.75 - -

RTP/I-40 Industrial 21,061,397 132,463 0.6% 1.8% $6.86 156,491 309,600

Southwest Wake Industrial 5,238,446 399,448 7.6% 2.3% $5.29 (97,313) 89,200

US-1/Capital Blvd Industrial 4,888,652 281,134 5.8% 3.1% $9.11 (24,800) -

West Raleigh Industrial 1,155,674 35,952 3.1% 4.7% $12.50 - -

Industrial Totals 63,381,162 1,261,683 3.1% 4.0% $7.31 501,188 1,145,700

Inventory (SF) Vacant SF Vacancy Rate

(%) Availability

Rate (%)Asking NNN

Rental Rate ($) Quarterly Net

AbsorptionUnder

Construction

Market Totals 84,171,653 2,498,300 4.3% 4.8% $10.90 770,525 1,779,925

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