Colliers Report: New companies, expansions and upgrades increase industrial demand

Research & Forecast Report
Q3-2018 COLUMBIA | INDUSTRIAL

Key Takeaways

• Rental rates continue to rise and vacancy decreased again this quarter.
• New companies are moving to the Columbia market.
• Current industrial tenants are expanding and owners are upgrading dated space.

To download the complete report: 2018 Q3 Industrial Columbia Report

Demand for space is high

The Columbia market has a strong demand for industrial space of any size as the sectors of advanced manufacturing, distribution and service industries continue to see rapid growth. New companies such as Garden State Lumber, which is now occupying 170,000 square feet at the Lexington County Industrial Park, and Morrisette Paper, which leased 65,000 square feet at 128 McQueen Street in West Columbia continue, to be drawn to the region. Also, established companies are expanding their current operations: Belk has 410,000 square feet at 120 Belk Court and now has expanded into an additional 154,000 square feet at 110 Belk Court. In addition, Constantia also expanded their footprint at 1111 Northpointe Boulevard and the CED Solar Panel Division expanded from 15,000 square feet to 30,000 square feet. As rental rates rise with diminishing availabilities remaining, dated industrial space is being upgraded and absorbed. For example, the 10700 Farrow Road building owner updated the roof and added LED lights throughout the facility. New construction is also supported, as evidenced by Midway III, a 200,000-square-foot Class A distribution facility, which was 100% leased prior to its completion.

Market Conditions

The Columbia industrial market is comprised of 68.41 million square feet within 1280 buildings throughout 17 submarkets. The overall Columbia industrial market absorbed 7,977 square feet this quarter, in spite of 414,000 square feet being vacated during the third quarter, and there were no new industrial buildings delivered to the Columbia market this quarter. Northeast Columbia posted the highest absorption of 116,732 square feet, followed by Southeast Columbia’s absorption of 91,325 square feet. The overall industrial market vacancy rate dropped only slightly from 8.81% during the second quarter of 2018 to 8.77% during the third quarter. Also, average triple net industrial rental rates remained basically the same at $3.78 per square foot through the second and third quarters.

Warehouse/Distribution

The warehouse/distribution sector comprises the largest portion of the Midlands industrial market, with more than 43.39 million square feet. Columbia warehouses absorbed 175,266 square feet during the third quarter of 2018. Also, the warehouse sector posted a vacancy rate of 7.65% this quarter, which is 5.4% lower than the second quarter vacancy rate of 8.09%. The average triple net warehouse rental rates rose from $3.72 per square foot during the second quarter of 2018 to $3.85 per square foot this quarter.

Manufacturing

The manufacturing sector in the Midlands is comprised of 22.69 million square feet, and there are currently 818,056 square feet under construction at the China Jushi manufacturing facility in Southeast Columbia. The manufacturing sector posted a net negative absorption of 207,012 square feet this quarter mostly due to SCANA vacating 263,374 square feet of space at 375 Metropolitan Drive. Likewise, the vacancy rate rose from 9.56% during the second quarter of 2018 to 10.47% during the third quarter of 2018. However, the average manufacturing rental rates rose this quarter; the average triple net weighted rental rate for the remaining manufacturing space was $3.17 per square foot this quarter, up from $2.94 per square foot during the second quarter of 2018.

Flex/R&D

The Flex/R&D sector in the Midlands has 2.36 million square feet within its submarkets, but there are currently no flex/R&D properties under construction within the market. This submarket absorbed 39,723 square feet this quarter, and the vacancy rate decreased from 14.74% during the second quarter of 2018 to 13.05% during the third quarter. The average triple net weighted rental rate decreased from $9.09 per square foot during the second quarter of this year to $7.72 per square foot this quarter.

Capital Investment & Employment

Through June of 2018, there were $649.2 million in capital investments, accounting for 1,068 jobs announced within the Columbia region. The types of investors are widespread, ranging from solar energy and a solar farm to a wood provider and wood manufacturer; there were also two polymer extrusion manufacturer expansions and a medical technology expansion to name a few. According to the Federal Reserve data through July of 2018, industrial employment comprises 11.2% of Columbia’s total employment, or about 45.1 million jobs in the Midlands region. There were 700 industrial jobs, one-third of the total added employment, added during the past 12 months ending with July 2018.

Significant Transactions

The statewide expansion of logistics, automotive and aeronautical production continues to drive 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 combing the region for locations and investments. According to CoStar, there were 15 industrial sale transactions and 21 industrial leases signed during the third quarter of 2018.

Sales

• 7 Sunbelt Court, a 34,000-square-foot, Class C manufacturing building, was purchased by Vinod A. Patel for $1.35 million.
• In August, Newfuturevest Two LLC purchased 268,000-square-foot industrial building at 2059 Congaree Road in Eastover.
• 170 Pontiac Business Center Drive, a 32,820-square-foot, Class B warehouse in Columbia, was purchased for $950,000 by the Adams Property Group.
• A Class C, 53,286-square-foot manufacturing building at 751 Old Clemson Road in Columbia was sold for $750,000 to 751 Old Clemson Road LLC.

Leases

• Husqvarna Consumer Outdoor Products NA Inc. leased 319,617 square feet at 2500 St. Matthews Road in Orangeburg.
• Garden State Lumber signed a 170,000-square-foot lease at the Lexington County Industrial Park located at 810 Bistline Court in West Columbia.
• A 151,200-square-foot lease was executed by Belk, Inc. in Blythewood.
• In July, the Carlstar Group, LLC signed a 136,504-square-foot lease at 358 Ascauga Lake Road in Graniteville.
• Harsco Rail leased 100,000 square feet on Technology Drive in Lexington.
• Jushi USA Fiberglass Co LTD renewed their 74,646-square-foot lease at 3130 Bluff Road.

Construction Pipeline

Under Construction

• Construction at the 818,056-square-foot China Jushi manufacturing facility in southeast Columbia continues.

Market Forecast

The transportation of products is crucial to industrial development in Columbia, and the centralized interstate network positions Columbia as a prime location for new distribution centers. The Columbia industrial market demand is high, with continued positive absorption and a declining vacancy rate, and these conditions are predicted to continue into 2019. Also, rental rates are expected to gradually rise over the next several quarters. In the Columbia market, there is currently an 818,056-square-foot warehouse under construction and 200,000 square feet of warehouse space proposed to be built. In addition, companies outside of the Columbia region will be drawn to the area due to a positive business climate and the central location within the state, where industrial activity continues to increase. Current tenants will continue to expand their industrial footprints as robust market activity increases.