3rd Quarter 2017 Hotline
by Joe A. Hollingsworth, Jr.
At the end of the first quarter in 2017, the US industrial market has really never been stronger. Specifically, only 5.4% of the nation’s industrial space was vacant; and, it turns out that this percentage is the lowest rate on record. Even though new construction slowed down at the end of 2016, there was almost 60 million square feet of new supply that was completed and absorbed in Q1 2017. This is a tremendous record.
Market rents for higher quality space are averaging above $6.00 PSF; and, as we have written before with the ridiculous new EPA enforced energy codes and drainage codes adopted by several states, they are affecting new construction prices dramatically. We predict that rents will average $6.40 PSF nationally by the end of the Q1 2018.
So, where is all the space demand coming from?: 1) The onshoring of companies is accelerating because of the current administration’s jawboning and trade policies; 2) the House of Representative’s proposed Border Adjustment Tax; 3) Monies needing to flee the “China bubble”; 4) the incremental increase of demand for products that are currently made in the US; and, 5) a burst of innovation in retailing and logistics.
A case in point on the President’s trade policy working is that out of 30 years of showing industrial property up to December 1st, 2016, we had only seen one Chinese company express any interest in the Southeast. However, since January 1st, we have had four specific serious Chinese interactions. These range from 90,000 SF up to 300,000 SF. Two of the Chines companies openly said that the reason they are moving is that they have been making the same product in China for over twenty years, and they read the “handwriting on the wall” and are now going to have their first American footprint. Some on the “left” would say this is coincidence. However, instead, this is real hard, tangible evidence that a seismic shift is occurring and increasing the pace of onshoring which is bringing high-paying manufacturing jobs back to America.
Another observation relating to the above list of reasons that space is being “taken down” at such a rapid rate is the supercharged innovation cycle that always follows an economic crash, slow recovery, or a period of overregulation (which in this case we have all three). The supercharged innovation that we are seeing is technology combined with a slight shortage of labor. Ingenuity is creating this cycle of supercharged innovation causing “reconfiguring” in ways we currently make products using new composite materials creating new products and the need for space.
I think the next twelve years are likely to be the best sustained period in our economic lives. Speed bumps will occur; however, this will be like the Reagan/Clinton years, only on steroids.
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, email@example.com