SOUTHEASTERN N.C. –– A network of investors has placed big bets on the Wilmington industrial market, spending millions to generate speculative buildings from scratch.
With no confirmed tenants during the planning and early construction phases, speculative building banks on a tenant eventually moving in (on the residential side, it’s like a model home).
The recent trend, cemented by three separate endeavors, shows investors are bullish about the expansion of industry in the Wilmington market.
Collectively, the teams are bringing more than 434,000 square feet of high-end industrial space (about seven football fields worth) to a slim market otherwise composed of aging facilities, representing a to-be-determined number of new jobs.
On the planning side, another half-million square feet are in the pipeline.
“It’s a pioneering effort,” said Chris Norvell of the Raleigh-based real estate investment firm, Edgewater Ventures. “It’s a market that has yet to be proven out but we wouldn’t do it –– we wouldn’t put our money there if we didn’t feel confident that we wouldn’t ultimately prove out our thesis.”
The three projects include:
- Pender Commerce Park
- Taylor Development Group
- Construction completed in October 2020
- Wilmington Trade Center
- Edgewater Ventures/McKinley Building Corporation
- Construction underway
- International Logistics Park
- Cameron Management/Windsor Commercial
- Construction underway
Kevin Lackey, Brunswick Business and Industry Development’s (BBID) director of business development, said the economic development group has been harping on the need for spec space since its inception in 2018.
“We as an organization continually see opportunities, and more importantly, miss opportunities, because companies are interested in the region but, due to risk mitigation, demand existing buildings,” Lackey said.
The group gets requests for information from the N.C. Department of Commerce, Elizabethtown-based North Carolina’s Southeast, and directly. BBID consistently shows large landowners and industrial leaders in the region the depth of these inquiries and encourages them to create new industrial products (this data is considered confidential, Lackey said).
“We just showed them the data over and over and over again about the missed opportunities,” he said. “And if we only had a building, we are almost positive we could provide them with a tenant.”
A majority of requests for information Wilmington Business Development (WBD) fields (serving Pender and New Hanover counties) inquire about existing buildings, according to CEO Scott Satterfield. (WBD also considers this data confidential.) If the market can’t meet a company’s needs, they move on to other comparable southeastern coastal markets, including Charleston, Savannah, Virginia Beach, and more (i.e., “the competition,” according to Satterfield).
“One of the historic challenges we’ve had in this market is a lack of available industrial space,” he said.
Both Satterfield and Lackey said the new buildings may help not just new clients, but existing ones, too. When five-year leases end, businesses that have outgrown their shell may pick up and leave if they can’t find a new home.
The last industrial spec project of scale in New Hanover and Pender counties was built in 2011 by Pender Progress Corp, according to Satterfield. The 40,000-square-foot building is now home to Mojotone in Burgaw, a custom and vintage guitar amplifier manufacturer.
With the new spec projects, Satterfield said Wilmington’s market now has an advantage stacked up next to price oversaturation in competitive markets.
“Class-A industrial product of this scale is essential to our recruitment efforts,” he said. “This state-of-the-art spec space is helping us attract national attention from high-octane companies that want a world-class environment – and are ready to move immediately.”
Below, view a map of the planned projects. Article continues below map:
Luring industrial companies
Industries scoping out the region aren’t looking for dirt, and they don’t have a year or two to lose to conceive something from nothing.
“They’ve got a six-to-nine month window of when they would need to be in,” said Chris Ramm, chief operating officer of Taylor Development Group. “So you need to have the product there to win the deal. And that simply didn’t exist in Wilmington.”
The new buildings have essentially created a new marketplace, according to Paul Loukas, partner and broker-in-charge at Cape Fear Commercial. “It’s a long time coming,” Loukas said. “Frankly, we needed this five years ago. It’s just now that developers feel comfortable that if you build these buildings, they will be filled.”
Aside from being new builds, the spaces are also markedly larger than the existing industrial supply.
“That’s a huge investment, and it’s rolling the dice, hoping you’ll find a tenant,” Loukas said. “There weren’t 100,000-square-foot users in our market. So it’s rolling the dice that we can attract that.”
Each building is more than 125,000 square feet and has modern features industrial clients are looking for: 32-foot clearance, built using tilt-up concrete construction, plentiful loading docks, and early-suppression, fast-response sprinkler systems. Absent modern advancements like the sprinkler system, some spaces can’t maximize on the height available by code, limiting tenants to far less than an older building’s full cubic storage capacity.
All three boast proximity to the Port of Wilmington and Interstate-140. None would be as attractive or possible without sizable recent public investments.
The N.C. Department of Transportation’s $411 million I-140 connection –– which wraps around all three southeastern counties with tie-ins to Highway 17, I-40, U.S. 421, and U.S. 74 –– finally opened in late 2017 after 17 years. New Hanover County and Cape Fear Public Utility Authority spent a combined $15.5 million to extend utilities from the Isabel Holmes bridge down U.S. 421 to the Pender County line, a project that finished in late 2019. On the other side of the line, Pender County spent at least $3.4 million on infrastructure improvements at the Pender Commerce Park in 2013, in preparation of Acme Smoked Fish, the park’s first business.
N.C. Commerce Department granted Brunswick and Columbus counties at least $2.1 million to extend utilities along Highway 74 to reach the International Logistics Park of North Carolina and the Mid Atlantic Rail Industrial Park, two megasites that hug the counties’ border.
With utilities locked down, investors are streamlining the process with move-in-ready buildings to lure industrial companies.
‘Activity breeds activity’
Taylor Development Group broke ground and finished their industrial spec building first, an $8 million venture in the Pender Commerce Park.
The Greensboro-based firm spent a year researching the market before landing on the commerce park, leaning on the homework already completed by the likes of Acme Smoked Fish, Polyhose, Empire Distributors, FedEd Freight, and Coastal Beverage Company.
Watching the growth of the industrial market in other regions as Wilmington lagged behind, coupled with the area’s growth projections, helped build confidence in the firm’s investment.
“We felt that the timing was right,” Ramm said. “We might be a little ahead of the curve but I’d rather be ahead than catching up.”
Though Ramm may have brought the first modern industrial building to the market in several years, he credits Norvell and Edgewater Ventures with “priming the pump for the market” for their work in the sector over the past few years.
“It doesn’t help the market that much having one building,” Ramm said. “Activity breeds activity.”
So far, the 126,360-square-foot building is one-quarter leased, with the still-unnamed tenant set to become operational within a week. Conversations surrounding would-be deals pulled due to Covid-19 have started up again, Ramm said, with the hope to be fully or majority leased by year’s end.
He’s hoping to capture demand for last-mile distribution space, third-party logistics, e-commerce needs, and light manufacturing. Plans for a second phase on a neighboring parcel with a similar product are under consideration, Ramm said, but still in flux.
Next to break ground was the Wilmington Trade Center, less than three miles from the Pender Commerce Park down 421. Backed by Edgewater Ventures and being constructed by McKinley Building Corporation, the development is the first-ever modern speculative industrial space constructed in New Hanover County with a Wilmington address, according to WBD.
Planned as a three-building project, construction is underway on the first 157,610-square-foot space. Norvell said he would pull the trigger on the second building once the first is more than half leased, and likewise go ahead with the third once there’s movement on the second. All three represent about 425,000 square feet.
“What we’re doing in Wilmington, candidly, is kind of small potatoes compared to what you would see in other southeastern markets,” Norvell said. Still, he acknowledged, for a third-tier market, it’s a big deal: “Believe me, it’s big for Wilmington, no doubt about it.”
Edgewater Ventures is likely the largest industrial property owner in the region, Norvell estimated, with roughly 1.4 million square feet of space in its portfolio. Living in Wilmington and owning buildings helped shape Norvell’s understanding of tenant and leasing dynamics, firming up a 15-year belief the region could use a speculative industrial development.
“I personally believe overall that Wilmington is at a threshold where the lack of this type of space is holding the market back,” he said.
With multiple leasing proposals out, interest in the building has been “solid,” Norvell said. “We’re encouraged by the activity. But I’m not usually high-fiving until the leases are actually signed.”
Norvell said if he had his preference, his project would be the only one out there, as he’s unsure how deep the Wilmington market is for this type of product. “It is a calculated risk really by all three of us,” he said. “I’d rather be the only guy doing it –– not one of three.”
After priming the land following Brunswick County’s commitment to bring utilities to the Columbus County line, hometown firm Cameron Management and Greensboro-based Windsor Commercial partnered for an $8.5 million spec building in the International Logistics Park.
Partnered with the park across Highway 74, the megasites have sat empty for at least a decade, difficult to attract tenants without being move-in ready. The county making a move to finance design work for utilities changed that landscape. “We finally had some brave takers in the Cameron group,” Lackey of BBID said.
Hill Rogers, broker-in-charge at Cameron Management, said the wager was based on instinct.
“We’ve made the decision that there was enough demand out there –– which is never a scientifically proven, quantitative decision,” he said. “You study the data but you also have to use your intuition, make gut decisions.”
The 150,660-square-foot development broke ground in the fall of last year and is slated to complete construction in the fourth quarter this year. Two leases at the site are pending, Rogers confirmed.
Can the market handle any more industrial spec space? “There’s probably enough for right now,” Rogers said. “But if we’re all a combination of lucky and good then we could use more spec space in six, 12, 18 months.”
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