The Word of Mouth Factor

Last year Procter & Gamble broke ground on a $500 million distribution and manufacturing hub in the Charleston, West Virginia market. Macy's has also opened a distribution hub nearby to handle its e-commerce activity, according to John Lesinski, of Colliers International, who with Ben Luke arranged the FCA lease on behalf of Equus Capital Partners. The expansion of the Panama Canal, which has brought more activity to the Virginia Inland Port, has also done its part to boost I-81's profile.

It was the P&G project, however, that has really turned heads. Although the first phase of the project won't deliver until early 2018, P&G has already leased 80,000 square feet from Shockey Cos. in the nearby Berkeley Business Park and is expected to take even more space in the near future, according to a Colliers Q1 market report for the region. More activity is expected as well, according to the report:

Fluor Corporation, the Texas-based construction and engineering firm hired to build the P&G facility, is also rumored to have a subcontractor in search of 150,000 to 200,000 square feet in the region as development continues to amp up on the project. Although most leasing activity for space has come from either P&G itself or those groups supporting site development, the next wave of demand expected to emerge could come from P&G's top suppliers seeking proximity to the new campus.

Local companies are also driving activity, according to Colliers. Trex's second build-to-suit development is now under construction in the Apple Valley Industrial Park. The lumber company will occupy the entire 356,000–square-foot building later this summer.

Monoflo International, a local manufacturer of molded plastic products, is expanding its existing facility on Baker Lane and has signed a short-term lease for 100,000 square feet at 480 McGhee Rd., which is also located in the Stonewall Industrial Park. In Fort Collier, the local door manufacturing company, Masonite, leased 54,700 square feet in Shockey's facility at 188 W Brooke Rd.

A Market Heading to $5 Per SF Rental Rates

E-commerce growth is a major driver behind the I-81 industrial development, Lesinski tells GlobeSt.com. (Ironically, all of three of the tenants, or prospective tenants, at Equus' Stonewall site are traditional warehouse and distribution users but DiLella as well agrees that e-commerce growth has changed the dynamic in this market).

In general, Lesinski says, “I-81 as a major logistics corridor is becoming more of a supply chain choice for a lot of national tenants as I-95 becomes more congested. Companies are now willing to go further west.”

He says the fundamentals have become so strong in the local market that rents will likely reach $5 per square foot for new industrial grade product by the end of the year — a prediction with which DiLella agrees, although he declined to discuss the asking rates for his facilities.

For all of the aforementioned trends, Colliers' Lesinski says that more spec industrial development will be coming to the market, encouraged by Equus' example and that of other spec developers such as Virginia Apple Storage. It is in the process of delivering a 100,000-square-foot speculative warehouse at 311 Independence Dr. , that is already 20 percent preleased to an existing client.

Equus, for its part, would love to build more spec at Stonewall but it is out of room. But DiLella is quick to point out the company also has a site in West Virginia about 15 miles north of the FCA project. “We can develop 1.6-million square feet there,” he says. “We are marketing it right now.”

WINCHESTER, VA—Last year the Philadelphia-based Equus Capital Partners made the leap and decided to move forward with spec construction on a 330,000-square-foot industrial warehouse and distribution center in the Stonewall Industrial Park. At 330,000 square feet, it is one of the largest spec industrial projects ever built in the I-81 submarket — an enclave long overshadowed by the I-95 stretch of development, despite the fact that it too is about two hours away from the Washington DC area.

Equus' bet has paid off: it in serious talks with two tenants to fully occupy the building, which will deliver this summer, Dan DiLella, Jr., vice president at Equus, tells GlobeSt.com. In addition, the company just signed a $34.5 million deal with FCA US (formerly known as Fiat Chrysler) for a build-to-suit, 400,400-square-foot lease on the same site.

The FCA US East Coast Mopar Parts Distribution Center facility, which will distribute auto parts to 200 FCA US dealers in the Mid-Atlantic and Northeast, is scheduled to open in the fourth quarter of this year.

Equus' timing was close to perfect. The company made the decision to move forward with the spec development around the same time the I-81 industrial submarket had landed on industrial tenants' national map. Indeed, DiLella says that FCA became aware of Stonewall because of other deals in nearby markets.

The Word of Mouth Factor

Last year Procter & Gamble broke ground on a $500 million distribution and manufacturing hub in the Charleston, West Virginia market. Macy's has also opened a distribution hub nearby to handle its e-commerce activity, according to John Lesinski, of Colliers International, who with Ben Luke arranged the FCA lease on behalf of Equus Capital Partners. The expansion of the Panama Canal, which has brought more activity to the Virginia Inland Port, has also done its part to boost I-81's profile.

It was the P&G project, however, that has really turned heads. Although the first phase of the project won't deliver until early 2018, P&G has already leased 80,000 square feet from Shockey Cos. in the nearby Berkeley Business Park and is expected to take even more space in the near future, according to a Colliers Q1 market report for the region. More activity is expected as well, according to the report:

Fluor Corporation, the Texas-based construction and engineering firm hired to build the P&G facility, is also rumored to have a subcontractor in search of 150,000 to 200,000 square feet in the region as development continues to amp up on the project. Although most leasing activity for space has come from either P&G itself or those groups supporting site development, the next wave of demand expected to emerge could come from P&G's top suppliers seeking proximity to the new campus.

Local companies are also driving activity, according to Colliers. Trex's second build-to-suit development is now under construction in the Apple Valley Industrial Park. The lumber company will occupy the entire 356,000–square-foot building later this summer.

Monoflo International, a local manufacturer of molded plastic products, is expanding its existing facility on Baker Lane and has signed a short-term lease for 100,000 square feet at 480 McGhee Rd., which is also located in the Stonewall Industrial Park. In Fort Collier, the local door manufacturing company, Masonite, leased 54,700 square feet in Shockey's facility at 188 W Brooke Rd.

A Market Heading to $5 Per SF Rental Rates

E-commerce growth is a major driver behind the I-81 industrial development, Lesinski tells GlobeSt.com. (Ironically, all of three of the tenants, or prospective tenants, at Equus' Stonewall site are traditional warehouse and distribution users but DiLella as well agrees that e-commerce growth has changed the dynamic in this market).

In general, Lesinski says, “I-81 as a major logistics corridor is becoming more of a supply chain choice for a lot of national tenants as I-95 becomes more congested. Companies are now willing to go further west.”

He says the fundamentals have become so strong in the local market that rents will likely reach $5 per square foot for new industrial grade product by the end of the year — a prediction with which DiLella agrees, although he declined to discuss the asking rates for his facilities.

For all of the aforementioned trends, Colliers' Lesinski says that more spec industrial development will be coming to the market, encouraged by Equus' example and that of other spec developers such as Virginia Apple Storage. It is in the process of delivering a 100,000-square-foot speculative warehouse at 311 Independence Dr. , that is already 20 percent preleased to an existing client.

Equus, for its part, would love to build more spec at Stonewall but it is out of room. But DiLella is quick to point out the company also has a site in West Virginia about 15 miles north of the FCA project. “We can develop 1.6-million square feet there,” he says. “We are marketing it right now.”