Real Estate - Commercial

Low Industrial Space Has Impact

By Cece Nunn, posted Sep 6, 2019
Coastal Beverage Co.’s building is under construction at Pender Commerce Park. (Photo by Christina Haley O'Neal)
Earlier this year, Nicholas Silivanch traveled with a client around Wilmington to look for industrial space in the 10,000- to 20,000-square-feet range.
They had no luck finding any.
“We had to go all the way up to Kinston to place them,” said Silivanch, partner in Wilmington-based Eastern Carolinas Commercial Real Estate.
Industrial space in Wilmington, large and small, is getting harder to find.
According to a July CoStar report Silivanch shared on his company’s website, the area’s industrial inventory is tight.
“Wilmington’s industrial leasing has been strong in recent years, compressing vacancies and allowing for rents to climb. Several leases involving large logistics and technology firms have contributed to this trend, and construction has been limited enough to be outpaced by strong leasing,” the report stated. “Rent growth has averaged 4.6% in the past year. Investor interest in Wilmington has trended upward in recent years, with several years exceeding $20 million in annual sales volume.”
While rent growth and sales volumes trending upward may be a good thing, a lack of inventory can lead to the loss of a potential employer, brokers said.
Under current conditions, companies often have to be able to make a move “faster than what we can deliver,” said Steve Hall, partner in Maus, Warwick, Matthews & Co., another Wilmington-based commercial real estate firm. “We’re just out of inventory. It’s hard to find stuff.”
The CoStar report also said, “Construction lagged in the metro for most of the cycle until 2017. New construction in the metro is generally less than 20,000 SF, and most often single tenant.”
Still, some companies have been able to find space in recent months, including Clean Eatz, a rapidly growing, and others.
“We completed the lease with Clean Eatz for 40,000 square feet in Dutch Square [off Market Street in Wilmington] earlier this year,” Silivanch said. “We have sold multiple smaller 1,200-square-foot units when they have come on the market. But overall, the market remains tight, which is why there is space preleasing on [U.S.] 421.”
He said water and sewer on U.S. 421 and in Castle Hayne are key.
“Those are two areas of industrial zoned properties that are lacking in municipal services, which if they had the services would develop,” Silivanch said. “Once water and sewer are there, that area will grow with small, medium and larger users. Municipal services are critical to advance the ball on recruiting industrial users and distribution to the area. Otherwise we will continue to lose out to other port metros that can provide similar services today.”
The need for more industrial space is an issue economic development officials have been grappling with in recent years, particularly in New Hanover County when it comes to larger spaces.
“There is a low inventory of available buildings of scale to meet today’s desired specifications for site location (100k+ sf, 30+ ft. ceiling heights, clear span construction, etc.),” said Scott Satterfield, CEO of Wilmington Business Development, in an email.
WBD is the main economic development agency for New Hanover and Pender counties, but the problem extends beyond those geographical boundaries.
“Our region has done an excellent job filling our available buildings, thus creating an enviable problem. It’s an issue that is not unique to New Hanover and Pender County,” Satterfield said. “There is a shortage of these types of buildings across Eastern North Carolina. That’s why one of the focuses in our office is on product development (in terms of buildings and sites).”
He said there’s still enough land in New Hanover and Pender collectively to accommodate economic growth.
“The key is to bring essential infrastructure (water, sewer, electric, gas, fiber, etc.) to this land so it can transition to marketable sites. Today’s clients want speed to market,” Satterfield said. “An example of regional site success is in the Pender Commerce Park, which is fully equipped with the necessary infrastructure.”
Pender Commerce Park includes Acme Smoked Fish, Empire Distributors, Coastal Beverage co. and FedEx Freight. Two additional companies have been in the process of buying land in the commerce park.
“In addition to activity at the Pender Commerce Park, we are currently working to identify and develop potential new sites in our region. Our partnership with both the private sector and the counties we contract with will be critical as we work to bring more sites online,” Satterfield said. “This will allow us to further diversify submittals for modern manufacturing, distribution/ logistics, food processing and Class-A office opportunities.”
The region needs larger buildings, he said.
“For example, when we engage with prospects asking for 100k+ sf of manufacturing or warehouse space in our two counties, we simply do not have that kind of building available today,” Satterfield said in his email. “That’s why it is so important that we continue to work on product development with our partners and allies. We don’t want this region to miss out on any opportunities. For us, it’s all about bringing jobs and investment here.”
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