BLS released April PPI on May 13: final demand jumped 1.4% MoM, the sharpest monthly increase since 2022, driven primarily by energy. The hot wholesale print followed the +0.6% MoM April CPI two days earlier and pushed the 10Y UST to 4.48% on May 13 -- the highest level since July 2025 and approaching 30-year-bond territory at 5.02%. Iran-linked energy pressure cited as a key driver. BLS PPI, CNBC, Trading Economics.
Two-handed inflation print (CPI hot Tuesday, PPI hot Wednesday) likely ends Fed-cut hopes for June FOMC (June 17) and pushes first cut into Q4 or later. Each 10 bps on the 10Y compresses industrial cap rate compression scenarios. Construction cost re-acceleration risk also rises: PPI for materials feeding industrial development jumped on the energy pass-through, raising cost-to-replace floors on existing stock.
For TCA: close any 2026-vintage refinancings on stabilized industrial product within the next 30 days while spreads have not yet widened to match the rate move. For new acquisitions, underwrite to a 5.0% in-place / 5.5% stabilized cap on Charlotte/Raleigh A-quality and walk away from anything inside 4.75% unless a value-add story justifies it. Construction starts: rebid all spec project budgets sourced before April -- a 2-4% cost increase is likely.
CBRE Q1 2026: G/S vacancy 6.3% (down 170 bps YoY); availability 10.0% (down 210 bps); net absorption rebounded sharply to +1.9 MSF (vs slower Q4 2025). Spartanburg West led with 3.5 MSF positive net leasing. Deliveries 2.2 MSF (1.2 MSF BTS + 1.0 MSF spec) across 10 properties. UC pipeline 2.4 MSF, down 29.6% QoQ and 25% YoY -- biggest discipline story in the SE. Rents eased 1.9% QoQ to $6.19 but stayed +3.7% YoY. Lee/Bentley Q1 report adds three 1MM+ SF transactions in Greer (DMA 1.40 MSF sublease, DHL 1.09 MSF renewal, confidential 1.02 MSF in Spartanburg). EQT Real Estate sold 185 Littlejohn St Class A to Pacolet Milliken at $120.58/SF. CBRE, Lee & Associates Q1.
G/S now reads as the cleanest SE industrial market: contracting pipeline + rebounding absorption + 170 bps vacancy compression. Sets up a fundamentals-led 2H 2026 vs Richmond and Charlotte where deliveries are still elevated. Three 1M+ SF leases in Greer concentrate big-box demand into one submarket and re-establishes Class A bulk pricing power. The Pacolet Milliken / EQT trade at $120.58/SF is a strong comp for institutional SE Class A.
For TCA: G/S becomes priority acquisition market over Richmond for the next 6 months. Target value-add Class B in submarkets adjacent to where the 1M+ leases just closed -- spillover tenant demand likely re-tenants older buildings at +200-400 bps rent uplift in next 12-18 months. Use the $120.58 Pacolet comp as the ceiling on stabilized Class A bids.
Durham City Council voted May 4 to approve a 60-day moratorium on data-center developments, joining Orange (1-year), Northampton (32-month), Rowan, Swain, Sanford-Lee, Stokes (Walnut Cove rezoning voided April 13), and Cumberland. The Stop Data Centers in Durham Coalition had requested 32 months. Concurrently, the Ratepayer and Resource Protection Act filed in the NC General Assembly May 4 would repeal data-center sales-tax exemptions, prohibit local incentives funded by ratepayers, and authorize the Utilities Commission to set tiered rates passing full capital and operating costs to DC tenants. WRAL, GovTech.
NC is now the leading state for institutional data-center entitlement risk -- 9 active local moratoriums plus a credible state-level dis-incentive bill. Even if the state bill fails, the policy signal raises political risk premiums and pushes hyperscaler site selection toward SC and VA. Durham's vote is particularly significant because it includes a Microsoft 1,385-acre megasite in Woodsdale Township already announced; the project goes from "approved" to "in question."
For TCA: pivot any DC-related land plays from NC to SC (Berkeley/Charleston, York, Lancaster) or VA (Mecklenburg, Halifax, Pittsylvania) for the next 12-18 months. Where TCA holds NC industrial parcels adjacent to substations or fiber routes, consider repositioning marketing materials toward logistics/manufacturing tenants vs DC end users -- entitlement value rapidly eroding. Monitor Walnut Cove appeal; precedent on voided rezoning could affect other entitled NC DC sites.
The 4.48% close on May 13 followed back-to-back hot CPI/PPI prints. If 10Y breaks above 4.55% and holds, expect SE industrial cap rates to back up 15-25 bps from current 5.0% prints by Labor Day. Refinance window for 2027-2028 maturities is narrowing; the next 30 days are the cleanest execution window before any PCE/jobs data on May 29 / June 5.
9 NC jurisdictions with active moratoriums plus a state-level dis-incentive bill creates a hard pause on NC DC capital deployment for at least 2026-2027. SC (Berkeley, York, Lancaster, Spartanburg) and VA (Mecklenburg, Halifax, Pittsylvania -- outside the saturated Loudoun cluster) become the path-of-least-resistance markets. Watch for site-selection announcements in next 60-90 days that confirm this rotation.
EQT Real Estate to Pacolet Milliken at $120.58/SF (G/S Class A 247K SF), Blackstone/Link at $244/SF (SoFla 800K SF), Walmart $250+/SF replacement basis (Kings Mountain 1.2 MSF). Despite 2026's softer absorption, institutional bid for SE Class A bulk has reset higher. Smaller/older Class B trades will lag this floor by 30-40%.
With UC pipeline contracting 25% YoY to 2.4 MSF and three 1MM+ SF Greer transactions just inked, the next 12-18 months should see secondary tenant demand backfill older Class B at premium rents. Target 1995-2010 vintage, 200-400K SF buildings within 5 miles of the Greer cluster at $55-65/SF basis; underwrite 5.5% in-place / 6.0% stabilized with rent growth of 4-5% annually.
NC's policy environment opens a 12-18 month window for SC/VA jurisdictions to capture rotating hyperscaler demand. Target option contracts on 200-1000 acre parcels in York/Lancaster SC and Mecklenburg/Halifax VA with substation proximity (within 5 miles) and water access. Underwrite as land plays with downside as logistics/manufacturing sites if DC capital does not arrive within the option window.
10Y at 4.48% post-PPI, but spreads have not fully widened. Borrowers with stabilized SE Class A industrial maturing 2027-2028 should lock 5/7/10-year fixed CMBS or life co debt before April PCE (May 29) or May jobs (June 5). Industrial conduit still pricing inside 150 bps over UST -- a window that could close 20-30 bps wider after another hot inflation print.