At about 60 million square feet, the Triangle industrial real estate market pales in comparison to major transportation hubs such as New Jersey, Atlanta, Dallas, Chicago or Los Angeles.
Those markets have anywhere from 700 million to more than a billion square feet.
But while the Triangle market lacks industrial heft, it has been among the best performing local sectors in recent years.
“It’s a small market, but it’s been very healthy; even through the downturn it stayed pretty healthy for us,” said Sam O’Briant, an executive vice president of Duke Realty’s east region.
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The industrial vacancy rate in the Triangle was 5.8 percent in the fourth quarter, according to Xceligent/Karnes. Duke, by far the largest industrial landlord in the region with 2.8 million square feet, has a vacancy rate of just 4 percent for its portfolio.
O’Briant said the health of the industrial sector is directly related to the Triangle’s growing population.
Industrial space in the Triangle largely exists to serve the population center – to store all the products needed by restaurants, homebuilders, hospitals, universities and other businesses and organizations. With the economy thriving and more people moving here, demand has remained strong with about 1.4 million square feet of space leased over the past two years.
Solid rent growth, and a good tenant base with plenty of companies expanding, has made industrial properties attractive to investors.
Last month, Stockbridge Real Estate paid $21.2 million for the New Hope Commerce Center, a two-building industrial space just off New Hope Road at the intersection of the beltline and U.S. 64 in east Raleigh.
The center’s 250,000 square feet of space is 100 percent leased, with the largest tenant being Owens & Minor, a distributor of medical and surgical supplies.
“We like the access to the road infrastructure and the residential, a good employment base right there,” said David Nix, a senior vice president with San Francisco-based Stockbridge.
Nix said while some knock the Triangle because it’s not a regional or national distribution hub, the region’s economic fundamentals make it a good long-term bet.
“Because the economy’s been strong you’ve got a good base of users that keep a nice, steady growth pattern and there hasn’t been the supply challenges as in other markets,” he said.
O’Briant said properties such as the New Hope Commerce Center or Duke’s Greenfield North Business Park in Garner, have benefited because it is hard to find land close in for industrial projects.
Rising land prices mean new industrial projects are being built on the outskirts of the Triangle, making existing properties more attractive.
“Existing buildings are just in great shape because they’re there to support all these businesses,” he said.
And O’Briant said several large users that don’t have a presence in the Triangle are now looking for space here.
“Some of the big retailers are looking out here and all that is a function of population growth and consumer demand because as ... demand increases they’ve got to have the product,” he said.