The I-40/I-85 Corridor is an emerging distribution area with a remarkably strong tenant mix between national manufacturers and distribution users, making it one of the most fundamentally sound corridors in the Sun Belt. The I-40/I-85 Corridor, squarely centered between the Triad (Greensboro, Winston-Salem and High Point) and the Triangle (Raleigh, Durham, Chapel Hill), is home to companies such as Walmart, Lidl, Ford, Kidde, Amazon, Chick-Fil-A, UPS, Lenovo, FedEx, Coca-Cola, among others.
Larry Lakins, Colliers
This corridor is seeing rapid expansion and is poised to be an epicenter of industrial activity in the region as the logistical significance of the area is attracting larger users and a growing amount of institutional capital.
Recently, this submarket has seen significant demand from larger users leading speculative developers to plan large, Class A industrial parks. Historically, the market has been dominated by older manufacturing buildings. The newer development in the area is making these properties more obsolete due to their lower efficiencies, a phenomenon marking a larger shift in the composition of the emerging submarket.
Hunter Willard, Colliers
The industrial inventory’s makeup is continuing to evolve over time, marking the transition from smaller manufacturing properties to distribution and significantly larger manufacturing operations. Buildings currently under construction are average a footprint of 300,000 square feet — which is more than 120,000 square feet above the average footprint of buildings delivered in the Raleigh-Durham area (roughly 180,000 square feet).
Andrew Young, Colliers
It’s not just the size of the buildings that is significant. The users that are relocating their operations to this corridor are also different than the region’s historical occupants, which were predominantly composed of furniture and textile manufacturers. A rapidly increasing life sciences industry in the Raleigh-Durham markets is furthering industrial expansion, a growth pattern that is now leaking into the I-40/I-85 Corridor.
Since the fourth quarter of 2020, the Research Triangle region has seen more than 5,200 life sciences jobs and nearly $3.2 billion in investment announced, the majority of which can be attributed to biomanufacturing facilities. The increased demand for supply chain assistance is likely to transform the industrial real estate landscape along this route.
A recent example of this emerging phenomenon can be found in the recent relocation of Thermo Fisher Scientific. With a strategic geographic location enroute to Greensboro and proximity to a diverse talent base, the I-40/I-85 Corridor is an ideal location for new facilities such as that soon to be occupied by Thermo Fisher.
The American supplier of scientific instruments, agents and consumables has been a prominent player in the medical supplier sector during the COVID-19 pandemic, and on Dec. 6 announced a deal with drugmaker Merck & Co. to manufacture an experimental COVID-19 antiviral pill. Thermo Fisher’s recent augmentation of its North Carolina operations comes with a capital investment of at least $192.5 million in the I-40/I-85 submarket, and others are expected to follow. Rather than waiting to secure a tenant prior to construction, developers are beginning to build speculative product.
The only constraint limiting markets such as these is the rise in construction costs and supply chain concerns rampant throughout the United States. Demand in this corridor is high and is expected only to rise further, as evidenced by the activity of developers such as Al. Neyer, the top commercial real estate developer that is responsible for Buckhorn Industrial Park, the new home of Thermo Fisher’s operations along the corridor.
Also on Dec. 6, Toyota Motor Co. announced that it will bring a $1.29 billion battery manufacturing plant along this corridor, creating 1,725 jobs in the first of what was hinted at potentially being a two-phase project at the site. On its website, Toyota cited the region’s diverse workforce, extensive and well-maintained highway system and strong government partnership at both the state and local levels among other reasons for their selection of the site. Toyota, like Thermo Fisher, will require a skilled labor force, something that the I-40/I-85 Corridor offers in abundance.
Both the Thermo Fisher and Toyota announcements are indicative of a trend expected to continue over the next several years. Employers choosing to locate along this corridor can draw upon labor pools of both the Triangle and Triad metropolitan areas. There is also enormous benefit to being connected with the overall I-85 Corridor, an emerging logistical megaregion running from just south of Richmond to Montgomery, Ala., with the I-40/I-85 Corridor poised to develop even further over the next several years.
— By Larry Lakins, Senior Vice President; Hunter Willard, Senior Vice President; and Andrew Young, Assistant Vice President of Colliers’ Industrial Services division. This article was originally published in the January 2022 issue of Southeast Real Estate Business.