1st Quarter 2018 Hotline
by Joe A. Hollingsworth, Jr.
For the last decade, landlords have had those calls that will absolutely ruin a landlord’s day from tenants saying that they need a “downward rent adjustment” or “shortened term or to shrink their space”. We have become so accustomed to hearing those requests that we, as an industry, have gotten into a very defensive mindset. Day after day for over a decade, we have been scared to raise per square foot sales price or rent price thus leading to lengthened debt amortization schedules and constant pressure on costs to construct. As developers and landlords, we have re-looked at our cost structures so much in the last 10 years that we have rung every possible penny out of them; and, most of us have had to become very efficient in what we do, or we could not survive.
Finally, the game changed over a year ago, and some in the industry still have a fear of asking for rent increases. We now have tremendous pricing power, both in sales and leasing. In my estimation, it is likely to be this way for the next decade. However, the biggest hurdle might still be ourselves. The mindset of what “we think” companies may be able to pay based on what they have said for the last decade is definitely a challenge for us to overcome. Finally after years of mediocre returns, it is time to be bold, assertive, and farsighted. Scarcity should be driving landlords’ demands for: 1) longer term leases; 2) stronger protective covenants; 3) parent company guarantees; and, 4) “take it or leave it” on “as is” space – all contributing to a much better outcome on build-to-suits, renewals, or new leases.
One thing that developers can be sure of is that costs are going to continue to go up with: 1) the international building codes forced on the states by the “DC” crowd; 2) the ridiculous EPA energy code that has been adopted in most states; 3) the prolonged drought of new industrial construction limiting capacity with so many suppliers; 4) the developing shortage of skilled labor to build facilities; and, 6) last but certainly not least, rising interest rates. All of these are contributing simultaneously to sizable cost increases to any type of industrial construction. There is simply nowhere to go with these cost increases, except pass them on. Therefore, let’s make “golden hay” while scarcity exists and demand is high.
Groundbreaking for Phase III of the SouthPoint Business Park held in Mocksville, NC.
Mocksville, NC (September 18, 2017)Local and state officials and members of the business community gathered to celebrate Phase III of the SouthPoint Industrial Park in Mocksville as well as the longtime partnership between Davie County and the Hollingsworth Companies which has provided the community with hundreds of jobs and millions of dollars in investments.
The Hollingsworth Companies broke ground today on construction of a 108,960 square foot spec building and three pre-graded building pads in the industrial park on US Hwy 601. This combined 641,000 square feet of additional industrial space has the potential of providing hundreds of additional jobs over the next five years.
“I would like to thank the community for being willing to invest time, effort, and money into being a true partner in making this park successful and I want to thank the entire county for their willingness to help us develop their area. It is my belief that the next 12 years will be the best economic period of our lives,” Hollingsworth said.
“We are coming out of the “Perfect Storm” that had formed against industrial development in the last 10 years. Over-regulation in banking, building codes, and environmental regulations had a virtual stranglehold on industrial developers.”
Representative Julia Howard, North Carolina House of Representatives, thanked Joe Hollingsworth for having the vision it took to come to Davie County. “Here we are, a rural community with a tract of land, but you had a vision of what that could become...We are very grateful that you believed in us and took that step to partner with us. We are approaching the 20-year mark, and I hope that as we reach the 40-year mark another group of people will be sitting under another tent celebrating another expansion.” she added.
Terry Bralley, President of Davie County Economic Development, is equally thankful for the relationship. “The partnership we have with the Hollingsworth Companies has allowed Davie County to leverage private money rather than risking the public’s money. We’ve been able to focus on what we do best -- water, sewer, roads, and infrastructure.”
He went on to say that “Economic development really is a team sport, it takes each and every one of us working together to make these kinds of projects happen. Our representatives in Raleigh along with the elected officials from across Davie County have learned how to coordinate efforts to get things done quickly and efficiently.”
‘It is a very competitive world we live in today,” Bralley added. “What really makes the difference is figuring out the opportunities that are out there and what it will take to make things happen. This community, time and time again, has led by example in terms of finding ways to get rid of impediments to growth.”
“We have been very successful in attracting industry and investment into this area to the point that today there are no existing buildings left in inventory and we have an unemployment rate that is one of the lowest in the state at about 3.5%. We can’t stop there. We have to look to the future. We all know that industry is looking for existing buildings because they want to be able to move in within 90 days.”
Christopher Chung, EDPNC CEO, said, “It’s always exciting to see communities take a proactive approach in adding more “product” in their market, and it’s what often differentiates the most successful local economic development efforts.”
“Davie County is fortunate to have great partner like Joe Hollingsworth and the Hollingsworth Companies... Best of luck as you all begin focusing on the really fun part: finding tenants for those buildings!”
About The Hollingsworth CompaniesThe Hollingsworth Companies are the largest non-urban Industrial Real Estate developer and construction firm in the southeastern United States with 125 tenants, eighteen million square feet of industrial space, spread over 15 states. The Hollingsworth Companies has facilities located in Alabama, Georgia, Mississippi, North Carolina, South Carolina, Tennessee, and Virginia. For more information about The Hollingsworth Companies, contact, Tom Mann, Senior Vice President of Industrial Real Estate, at 865.457.3701, firstname.lastname@example.org