Westinghouse industrial corridor has been booming. Now, some predict it will run out of space

Steele Creek in southwest Charlotte is home to the largest industrial corridor in the Carolinas.

This warehousing and manufacturing powerhouse has more than 20 million square feet of industrial space. It is the workplace of more than 44,000 employees.

Easy access to rail and air transportation and Interstates 485, 85 and 77 has been like a steroid shot for the Westinghouse industrial corridor.

But the area might be too attractive for its own good, as some say it appears to be running out of industrial space.

Anne Johnson, industrial broker and senior vice president of CB Richard Ellis, a commercial real estate firm in Charlotte, said vacancy rates in the area are dropping.

“I think probably by the end of the year we are going to have a shortage,” she said. “I think at that point, probably by next year, we will see some people building new buildings. The problem is there is a shortage of land.”

As building space disappears, there might be more of a push for office and retail buildings, instead of industrial, because those buildings can demand higher prices per square foot, she said.

But the Charlotte-Mecklenburg Planning Department disagrees, saying there will be desire for industrial space in the area.

Melony McCullough, the planning department’s project coordinator for the Steele Creek area plan, said there will be demand for an additional 10 million square feet of industrial space over the next 20 years.

It’s all about the infrastructure

Transportation infrastructure is credited as being a major driver of businesses to the Westinghouse industrial corridor.

“While most people live near I-77, for industrial and distribution I-85 is critical because it’s more of a regional road,” Johnson said. “In the past, before 485 opened, trucks would have to drive to I-85 via I-77. Now they cut through I-485, and it’s much easier for them to access.”

And then there’s rail access, which is key for Germany-based Siemens Energy, the anchor business at the end of Westinghouse Boulevard at the site of the former Westinghouse energy plant.

All of Siemens’ products ship by rail because of their large size, Mark Pringle, site manager, said. Siemens owns the rail line from its plant to state Highway 160, where the line connects to Norfolk Southern rail tracks.

The area also falls within a foreign trade zone, meaning manufacturers can ship goods in and out of the area without being charged for tariffs and duties, said Patrick McGrath, a broker with Charlotte-based Percival McGuire, a commercial real estate brokerage firm.

“That’s a big cost-saver and advantage for manufacturers,” he said.

But for Johnson, a foreign trade zone is not as important for her industrial clients.

“We just don’t have that many folks that have that many containers coming in,” she said. “That’s probably why it’s not as much of a big deal.”

Westinghouse’s role

Pringle, who worked for Westinghouse before joining Siemens, remembers visiting the former Westinghouse plant years ago.

“I can remember driving out that road with nothing on it,” he said. “They built Westinghouse Boulevard just to get to the plant.”

The site continues to attract major investments.

When Siemens announced in 2010 that it was building more than 1 million square feet in industrial space, it became the largest manufacturer in Mecklenburg County.

The expansion will more than double the number of employees Siemens employs in Charlotte. Prior to the announcement, Siemens employed approximately 800. The company plans to hire 825 employees for the gas turbine plant and 200 more office workers.

In addition to the Siemens expansion, ProFlowers, Bohle, Single Temperature Controls, GEO Plastics, Combi USA, Bluestar Silicones, Kelly Pipe, Steinbauer Tuning Technologies and Groninger USA have announced plans to build, expand or locate in the area, according to the Charlotte Chamber of Commerce.

Running out of industrial sites?

According to a first-quarter 2011 report from CB Richard Ellis, 555,504 square feet of vacant building space in southwest Charlotte, which includes the Westinghouse industrial corridor, was absorbed in 2010 for an average lease rate of $4.15 a square foot. That accounted for more than 61 percent of all industrial space absorbed in the Charlotte market in the past four quarters.

The southwest market has a 10.6 percent vacancy rate, the highest of any Charlotte submarket, according to CB Richard Ellis. But Johnson said that stems from the large amount of industrial space in the corridor.

There are 1,585 acres of vacant industrial land in the area, according to the planning department. That may sound plentiful, but there are murmurs throughout the real estate community that the area is becoming limited in its industrial offerings.

“There’s a perception that we are running out of industrial land,” said Brad Richardson, Charlotte’s economic development manager. “However, there’s a lot of industrial land in Charlotte still.”

Richardson said the problem might be that there is a shortage of affordable, competitive industrial land because of cheaper land in surrounding counties, such as Gaston, Lincoln, York and Lancaster.

Add to that dilemma that developers can charge higher rates for office and retail space than they do for industrial, and the outlook for industrial construction in the corridor may be uncertain.

But Johnson believes that if there is a shortage of space, rates for industrial buildings will rise and make it worthwhile for a developer to build.

“But if the rates are too low, developers can’t get the kind of return they need,” she said.

Tara Ramsey can be reached at [email protected].