It All Happens on I-85

Source: CoStar

This week's chart of the week comes from real estate data provider CoStar[2]. The chart highlights the elevated industrial vacancy rates along the Interstate 85 corridor in the Southeast US, despite significant development in recent years. Interstate 85 is a major north-south highway that stretches from Montgomery, Alabama, to Petersburg, Virginia, passing through key metropolitan areas such as Atlanta, Charlotte, and the Raleigh-Durham region. Since 2019, 65 million square feet of industrial space has been added within a one-mile radius of I-85, representing a 21% inventory expansion over five years.

However, leasing velocity has slowed considerably, with only about one-third of the space built since 2023 finding tenants. This trend is particularly evident in the largest speculative warehouses located closest to interstate interchanges. CoStar analysts attribute the slowdown to a shift in consumer spending, with demand for large warehouse spaces cooling as consumers prioritize services over household goods.

Despite current challenges, analysts remain optimistic about the future of the industrial market along the I-85 corridor. With improving consumer confidence, positive real wage growth, and strong regional population growth forecast for the Southeast, demand for large distribution spaces is expected to rebound in the coming quarters. As the region continues to attract manufacturing expansions and population growth, the industrial market along the I-85 corridor is likely to remain a key player in the region's economic development.

[2] Industrial Vacancy Along Key Southeast US Highway Remains Elevated (costar.com)