Colliers Report: Industrial market is ripe for expansion

Research & Forecast Report
Q4-2017 COLUMBIA | INDUSTRIAL

Key Takeaways

• Vacancy is expected to decrease as more business is drawn to Columbia.
• Conditions are good for providing skilled employees.

To download the complete report: Q4 2017 Columbia Industrial Market Report

Market Conditions

South Carolina is a flurry of industrial activity, as the plans of an expanding Port of Charleston come to fruition, logistics infrastructure improvements begin, and global companies continue to locate and invest in South Carolina. There are positive changes to be seen throughout the state. South Carolina was ranked #2 on the 2017 Top States for Doing Business commentary by Area Development magazine, in addition to being awarded a “2017 Silver Shovel Award” in the States with 3 to 5 Million Population category. The Shovel Awards are awarded to states that are “compiling healthy and impressive rosters of projects and announcements, expansions and new facilities.”

With these statewide honors, it is easy to see why business is picking up across the state, and central South Carolina is no exception. Industrial employment comprises 12.2% of the total workforce; in addition, there have been 3,900 total non-farm jobs added in the last twelve months, which is a 2.1% increase over last year.

As major global employers locate throughout South Carolina, they strive to hire employees who have the skillset to fill the positions needed. ReadySC and Apprenticeship Carolina are partnered with a network of five technical colleges within the Midlands area who provide workforce training and apprenticeship programs to ensure that, when employers locate in South Carolina, they provide capable, skilled employees. This is critical, as the growing economy makes it more difficult for companies to find skilled labor to fit their needs.

2017 Market Recap

This year, the industrial data collection methodology changed in order to provide an accurate depiction of the industrial market (see footnote for details). The Midlands industrial market finished strong this year, posting an annual absorption of 1,300,199 square feet. The triple net average market rental rate rose to $3.51 per square foot, up 8.67% from this time last year. The overall market vacancy rate was 9.84%. Industrial construction is also on the rise, with 1,060,056 square feet currently under construction and an additional proposed 200,000 square feet.

Warehouse/Distribution

The warehouse/distribution sector comprises the largest portion of the Midlands industrial market, with more than 42 million square feet. The overall market warehouses vacancy rate was 8.69%, and net absorption was 69,653 square feet. Average triple net rents rose considerably over the third quarter, from $3.30 per square foot up to $3.52 per square foot. There are currently two warehouses under construction which, when completed, will add 242,000 square feet to the Columbia warehouse market.

Manufacturing

The manufacturing sector in the Midlands is comprised of 22 million square feet, and there are currently 818,056 square feet under construction. This sector ended the quarter strong with a positive absorption of 73,435 square feet. Vacancy fell again this quarter, from 12.07% during the third quarter to 11.46% this quarter. Also, average triple net rental rates rose to $3.00 per square foot, up 5.63% over the third quarter rental rate of $2.84 per square foot.

Flex/R&D

Vacancy in the flex market rose slightly from 16.23% last quarter to 16.25% during the fourth quarter; however, 20,622 square feet were absorbed. The triple net average rental rates fell from $10.01 per square foot during the third quarter to $9.20 per square foot this quarter.

Capital Investments

In 2017, $943.5 million in capital investments were announced throughout the Columbia market. Several are automotive manufactures and a few are aerospace-related. Due to the centralized location of Columbia and only a two-hour drive to access the global marketplace via the Port of Charleston, the Midlands can expect capital investment numbers to continue to rise as companies locate here in order to satisfy the demands of the growing manufacturing sector.

Significant Transactions

The statewide expansion of logistics, automotive and aeronautical production is driving the expansion of manufacturing in the Columbia market. With access to national markets via Interstates 20 and 26 and international markets through the Port of Charleston, tenants and investors are scouring the region for locations and investments.

Sales

• STAG West Columbia 3 LLC purchased a 200,000-square-foot class A industrial warehouse, located at 825 Bistline Drive in West Columbia. The new spec building was delivered with 50,000 square feet leased by Laguna Tools.
• 501 Clemson Road, a 77,400-square-foot Columbia warehouse, traded for $2 million, or $25.84 per square foot.
• Interstate Centre, a 42,122-square-foot flex building located on Chris Drive in West Columbia, sold for $1.5 million, or $36.80 per square foot.

Leases

• Laguna Tools leased 50,000 square feet at 825 Bistline Drive, representing its first East Coast distribution center.
• Husqvarna leased 44,465 square feet at 3130 Beltline Road.
• Woodland Systems USA, Inc. executed a new lease for the 39,353-square-foot manufacturing building located at 200 Business Park Boulevard.
• Consolidated Electrical Distributors expanded its West Columbia location from 15,000 square feet to 36,900 square feet at 2500 Leaphart Road.

Construction Pipeline

Construction activity remains high in the Columbia market, with 1.06 million square feet under construction.

Under Construction

• Construction at the 818,000-square-foot China Jushi manufacturing facility in Southeast Columbia continues.
• 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

• Samsung completed its 150,000-square-foot expansion of the former Caterpillar plant in Newberry, SC. This manufacturing facility now totals over 600,000 square feet.

Market Forecast

The future looks bright for the Columbia industrial market as continued development interest will expand the demand for industrial buildings. As the Jushi facility nears construction completion, it, along with Samsung and Continental, may draw new supporting companies to this region in order to expand their growth capacity. This would bring the vacancy rate down and drive the rental rates higher as the market tightens. In addition, as the industrial buildings lease to capacity, construction can be expected to be planned for next year since the market is ripe for business development and is an attractive location to build a business.

For statewide commercial real estate news check out our market reports at: www.colliers.com/southcarolina/insights.

To download the complete report: Q4 2017 Columbia Industrial Market Report

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