Colliers Report: South Carolina industrial demand on the rise

Research & Forecast Report
Q2-2018 SOUTH CAROLINA | INDUSTRIAL

Key Takeaways

• As high quality space is delivered to the South Carolina industrial market, the rental rate will increase.
• Industrial construction activity is increasing throughout South Carolina, but the demand is high enough to absorb it.

Market Conditions

Throughout South Carolina there are currently 15.79 million square feet of industrial buildings under construction, and 1.13 million square feet of new buildings were delivered to the industrial market during the second quarter of 2018. The South Carolina market absorbed 1,967,807 square feet this quarter; thus, the market vacancy rate dropped to 7.97% from 8.20% during the first quarter of 2018. The triple net average market rental rate decreased this quarter to $3.66 per square foot; last quarter the weighted rental rate averaged $3.86 per square foot for the remaining available industrial space.

Augusta | Aiken (South Carolina portion)

The South Carolina portion of the Augusta | Aiken market consists of 10.09 million square feet, half of which is manufacturing space. The vacancy rate dropped slightly from 12.84% during the first quarter of 2018 to 12.80% this quarter, and the market absorbed 4,287 square feet. No new industrial buildings were delivered to this market; however, there is a 40,000-square-foot manufacturing building currently under construction. The weighted rental rate for the South Carolina portion of the Augusta/Aiken region averaged $2.52 per square foot during the second quarter of 2018.

Charleston

The Charleston industrial market has 51.02 million square feet of industrial inventory. Excluding the first 1.5 million-square-foot phase of the Volvo manufacturing facility, three buildings totaling 300,169 square feet were delivered to the Charleston market this quarter. There are also 21 buildings currently under construction totaling 3,250,485 square feet. The Charleston industrial market absorbed 801,162 square feet, and the market vacancy rate dropped from 10.24% during the first quarter of this year to 9.20% this quarter. The average triple net weighted rental rate increased slightly to $5.10 per square foot during the second quarter of 2018 from $5.06 per square foot during the first quarter of this year.

Charlotte (South Carolina portion)

The South Carolina portion of the Charlotte submarket has a total industrial inventory totaling 36.2 million square feet, and one new 12,000-square-foot flex/R&D building was delivered to the Charlotte market this quarter. In addition, there are four industrial buildings totaling 777,162 square feet under construction in this region. This market absorbed 364,478 square feet and the vacancy rate dropped from 9.02% during the first quarter of 2018 to 8.05% during the second quarter of 2018. The South Carolina portion of the Charlotte market average weighted rental rate was $7.05 per square foot.

Columbia

The Columbia industrial market has 68.4 million square feet of industrial inventory and two new warehouses totaling 211,601 delivered to the market this quarter. Also, there is currently one 818,056-square-foot industrial facility under construction in southeast Columbia. The Columbia market absorbed 192,573 square feet; however, due to the new construction delivery, the vacancy rate remained unchanged. The triple net weighted rental rate within the Columbia region averaged $3.75 per square foot during the second quarter of 2018.

Florence | Myrtle Beach

The Florence | Myrtle Beach market has 36.13 million square feet of industrial inventory and two warehouses totaling 144,502 square feet are currently under construction. This market absorbed 258,960 square feet and the vacancy rate decreased 4.8%, from 14.52% last quarter to 13.81% this quarter. The triple net weighted rental rate averaged $2.51 per square foot.

Greenville | Spartanburg | Anderson

The Greenville | Spartanburg | Anderson market is comprised of 196.87 million square feet and there are currently 19 industrial buildings totaling 6.31 million square feet under construction. This market absorbed 315,756 square feet this quarter, even with the addition of four warehouses totaling 607,607 square feet. The market vacancy rate only rose 13 basis points to 6.05% this quarter, up from 5.92% during the first quarter of 2018. The average triple net weighted rental rate dropped slightly from $3.90 per square foot during the first quarter of this year to $3.40 per square foot this quarter.

Savannah (South Carolina portion)

The Savannah market, within South Carolina, has 9.97 million square feet of industrial space and there are currently no buildings under construction. This market absorbed 27,591 square feet during the second quarter of 2018 and the vacancy rate was 6.51%, 4.21% lower than the first quarter 2018 vacancy rate of 6.79%. In the South Carolina portion of the Savannah market, the triple net weighted rental rate averaged $2.82 per square foot.

Notable Transactions

According to CoStar, there were 105 sale transactions, including a 120-property portfolio purchased by Mapletree Investments, Ltd. The South Carolina portion of the portfolio included two Greenville County distribution properties located at White Horse Industrial Center and two Spartanburg County industrial properties at 1375 Howell Road and 15 Tyger River Drive; these properties total 1,049,944 square feet and were purchased for a combined price of $83.82 million. The $30.5 million sale of North Pointe Industrial Park was one of many remarkable sale transactions this quarter, in addition to Flatwood Industrial Park in Spartanburg, which sold for $23.58 million. There were many significant lease transactions during the second quarter of 2018. An undisclosed tenant signed a 507,512-square-foot lease at 845 Paragon Way, and Ross Stores leased 431,035 square feet at 365 E. Springdale Road; both are in Rock Hill.

Construction Pipeline

Under Construction

• Construction continues on the Inland 85 Logistic Center in Greer, which is the largest speculative building in the market. It consists of 500,280 square feet, which is expandable to 1,186,680 square feet, and is located on 324 acres of land.
• The 2.5 million-square-foot Michelin distribution center construction continues; it is located on Highway 101 in Spartanburg County.
• Volvo continues the second phase of construction. Approximately 600,000 square feet of its 2.1 million-square-foot facility is still under construction.
• Mercedes Sprinter Van continued construction of its 1.2 million-square-foot manufacturing facility at 8501 Palmetto Commerce Parkway in North Charleston.
• The Omni Industrial Campus has over 1,025,288 square feet currently under construction. These buildings will deliver in stages, but all are expected to be completed by the fall of 2018.
• The 950,000-square-foot Ridgeville Industrial Campus in Dorchester County is under construction and is expected to deliver by the end of 2018.
• Construction at the 818,000-square-foot China Jushi manufacturing facility in southeast Columbia continues.
• Electrolux Additions is constructing an 800,000-square-foot manufacturing building in Anderson County.
• Sundaram Clayton is constructing a 660,000-square-foot manufacturing building in the Summerville market.
• Site B in the Riverwalk Business Park, located in Rock Hill, will have a 507,512-square-foot warehouse available around the second quarter of 2018.
• Plastic Omnium continues construction on the 500,000-square-foot manufacturing facility located at 310 Genoble Road in Greer; it is expected to deliver by the middle of 2018.
• Hillside Enterprise Park is constructing Building 4 of 408,000 square feet to be delivered approximately June of 2018.
• There are 343,150 square feet of warehouse space under construction within the Charleston Logistics Center in Summerville; this project is expected to deliver during the second quarter of 2018.
• Miller Valentine is constructing the 200,000-square-foot Midway III speculative warehouse in the Lexington County Industrial Park, and 25,000 square feet of this building is already leased.

Completions

• Approximately 1.5 million square feet within the Volvo automotive facility was completed.
• Velocity I, a 297,607-square-foot distribution building located at 901 Victor Hill Road within Velocity Park in Greer, is now complete.
• Midway III, a 200,000-square-foot, Class A distribution facility was completed in June.
• A 200,000-square-foot warehouse was completed at the Freightliner building located at 201 Hyatt Street.
• 7054 Weber Drive in Ladson is the site of a 173,000-square-foot Class A industrial warehouse.
• In Ladson, within the Carolina Commerce Park, a 117,000-square-foot, Class A warehouse completed this quarter at 4136 Carolina Commerce Parkway.
• Construction is now complete on a 100,000-square-foot warehouse located at 564 Gilliam Road in Greer.

Market Forecast

The South Carolina industrial market is expanding at a rapid pace, with 15.79 million square feet of industrial buildings under construction across the state. The regional growth is due to: incredible logistic capabilities, including the addition of Inland Port Dillon this quarter; increased regional capital investments; improving infrastructure throughout the state; and the integration of workforce training with educational institutions to provide skilled employees. Even though new construction is expected to be completed through 2018, the market is predicted to post positive absorption due to the increasing demand for industrial space in South Carolina. As high-quality space is delivered to the market and owners upgrade dated industrial buildings, the rental rate is expected to gradually increase over the next few quarters.