Colliers Report: Charleston construction deliveries raise vacancy rate

July 15, 2020


Research & Forecast Report


Key Takeaways

  • At first glance it appears the Charleston submarkets had a negative quarter of activity, when in reality the market was strong enough to retain current tenants while adding new space to the inventory.
  • There are 1.67 million square feet of industrial construction in the Charleston pipeline.
  • The actual effects of the outbreak of COVID-19 on the industrial real estate sectors will not be realized for several quarters.

Near-vacant construction completed this quarter

Despite the second quarter of 2020 occurring amid the Coronavirus and temporary business closings, industrial construction still completed within the Charleston warehouse sector. There were 545,888 square feet of warehouse completions this quarter; however, 486,513 square feet of the warehouse space is vacant. While the Charleston industrial market was able to make it through a much-anticipated slow quarter due to COVID-19, that amount of vacant space added to the Charleston industrial market increased the vacancy rate. At first glance it appears the Charleston submarkets had a negative quarter of activity, when in reality the market was strong enough to retain current tenants while adding new space to the inventory. Since warehouse and manufacturing space demand has remained strong and within the essential workforce pipeline, it is anticipated that the warehouse space delivered this quarter and the construction still in the pipeline will be absorbed quickly upon delivery.

Market Overview

Overall Charleston industrial market

The Charleston industrial market has 58.05 million square feet of industrial inventory with 1.67 million square feet under construction. In addition, there are approximately 18 buildings proposed to be built within the Charleston market which would add an additional 4.70 million square feet to the industrial inventory. The Charleston submarkets posted a negative absorption of 154,849 square feet because there were two nearly-vacant industrial buildings totaling 545,000 square feet delivered within the Charleston market. Due to new construction deliveries, the overall market vacancy rose from 8.85% last quarter to 9.97% this quarter. The overall market average triple net weighted rental rate decreased this quarter to $5.95 per square foot.


The Charleston industrial market warehouse/distribution sector is comprised of 42.29 million square feet within 847 buildings and comprises 72.85% of the Charleston industrial market. There are six warehouses totaling 1.05 million square feet under construction throughout the Charleston market, and an additional 16 warehouses totaling 4.16 million square feet are proposed to be built. During the second quarter of 2020 Charleston warehouses absorbed 411,158 square feet, over half of the total warehouse absorption occurred within the Summerville submarket. Despite positive absorption, because of two construction deliveries with a total of 486,513 square feet of vacant space; the warehouse/distribution sector vacancy rate increased from 10.33% last quarter to 10.51% during the second quarter of this year. The average triple net weighted warehouse rental rate increased from $5.76 per square foot last quarter to $6.04 per square foot during the second quarter of 2020.


Manufacturing is primarily used to assemble goods for sale and distribution. There are approximately 11.30 million square feet of manufacturing space within the Charleston market. There is one building under construction which, upon completion, will add 622,677 square feet of inventory to the market and one 520,000-square-foot building proposed to be built; both are within the Summerville submarket. There are very few manufacturing spaces available in the Charleston market; only two submarkets posted activity-the Hanahan/North Rhett and North Charleston manufacturing submarkets posted a negative 556,743 square feet during the second quarter of 2020. The overall manufacturing vacancy rate increased to 9.44% and triple net weighted rental rate during the second quarter of this year averaged $4.39 per square foot.


Flex/R&D space is defined as industrial space where more than 30% of the building is utilized for office space. The Charleston flex/ R&D market is comprised of approximately 4.46 million square feet. One 16,000-square-foot flex building is currently proposed to be built within the Clements Ferry submarket. The flex/R&D sector posted a negative 9,264 square feet during the second quarter of 2020 and the vacancy rate within the flex/R&D sector increased to 6.22%. The average triple net weighted rental rate increased slightly from $8.83 per square foot last quarter to $8.97 per square foot during the second quarter of 2020.

Capital Investment & Employment

There have been approximately $285.58 million in capital investments within the Charleston industrial market from the second quarter of 2019 through the second quarter of 2020. The capital investments produced 1,849 jobs, with the types of investors including a linen provider for medical facilities, solar energy, information technology and logistics. Also, according to the Federal Reserve data over the past 12 months and due to the temporary shut-downs caused by the Coronavirus, there were 42,500 less jobs in the Charleston metropolitan statistical area, 694 of which were industrial jobs. When the temporary closings and Coronavirus restrictions are lifted, employment numbers are anticipated to normalize. Overall non-farm employment totals 332,200. The Charleston employment rate is still strong at 96%; however, the numbers are expected to continue fluctuating due to the effects of COVID-19.

Significant Transactions

There were 15 Charleston industrial sales reported by CoStar during the second quarter of 2020, an increase over the first quarter sale activity. Leasing activity remained steady during the second quarter of 2020 and according to CoStar, there were 30 industrial leases executed this quarter.


  • For $14.5 million, GFI Partners LLC purchased a 544,400-square-foot warehouse in Dorchester County.
  • For $3.42 million, Thaynes Capital Northwoods II LLC purchased 7450 Industry Drive in Charleston County.


  • Kontane Logistics LLC leased 81,868 square feet at 831 Drop Off Road in Summerville.
  • Trigo leased 65,625 square feet at 264 Deming Way in Summerville.
  • National Logistics leased 64,000 square feet at 2440 Clements Ferry Road in Charleston.

Market Forecast

Many essential service providers which have stayed open across the nation are using the logistics chain to deliver necessary goods and services throughout the country. Therefore, several industrial businesses have remained open throughout the second quarter-despite predictions of closings. Even though the Charleston market increased its overall vacancy rate due to vacant construction completions, industrial activity is expected to increase over the next few quarters in response to strong demand and COVID-19 restrictions being relaxed or lifted. Industrial buildings used temporarily for medical purposes to combat the Coronavirus or to manufacture necessary equipment is anticipated to continue and even possibly expand, while both inland ports and the Port of Charleston are predicting increased activity over the third and fourth quarters of 2020. While the outlook is positive for the industrial sector at this time, the true effects of the Coronavirus will not be evident for several quarters.

A Note Regarding COVID-19 

As we publish this report, the U.S. and the world at large are facing a tremendous challenge, the scale of which is unprecedented in recent history. The spread of the novel Coronavirus (COVID-19) is significantly altering day-to-day life, impacting society, the economy and, by extension, commercial real estate.

The extent, length and severity of this pandemic is unknown and continues to evolve at a rapid pace. The scale of the impact and its timing varies between locations. To better understand trends and emerging adjustments, please subscribe to Colliers’ COVID-19 Knowledge Leader page for resources and recent updates.

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