Colliers Report: Robust market will uphold continued growth

Research & Forecast Report
Q1-2018 Columbia | Industrial

Key Takeaways

• Passing of the “Nuisance Bill” will safeguard manufacturers from unnecessary lawsuits.
• Columbia expects continued industrial growth and investment throughout 2018.

To download the complete report: 2018 Q1 Industrial Columbia Report

Nuisance bill will protect manufacturers

When a manufacturer evaluates a city for an additional plant or plant relocation, one factor they gauge is the level of support surrounding the business community. Industrial businesses moving to South Carolina can rest assured they will not be bothered with frivolous lawsuits from new neighbors. This confidence stems from the passage of bill H.3653, which protects manufacturers from “nuisance lawsuits”. Governor McMaster believes this bill is important to manufacturers interested in South Carolina job creation by protecting them from unwarranted legal actions. It states that industrial plants cannot be deemed a nuisance if their licenses, permits, certifications and authorizations are current in addition to being compliant with all local, state and federal laws and regulations. This bill will protect existing companies from lawsuits when new residents or businesses locate near an operating plant. The signing of this bill is a positive move for South Carolina manufacturers, and is applauded by the South Carolina Chamber of Commerce and other business groups.

Market Conditions

The overall industrial 2017 annual absorption was 2.49 million square feet. The Southeast Columbia submarket leads the other submarkets, absorbing 510,808 square feet this year, followed by Newberry County, which posted a net annual absorption of 426,565 attributed almost entirely to Samsung’s purchase of the closed Caterpillar Plant located in Newberry. Also, the Northeast Columbia submarket absorbed 396,667 square feet. The 2018 first quarter overall market vacancy rate is 8.24%, 28.22% lower than the 11.28% vacancy rate at this time last year. During the first quarter of 2018, the overall average triple net industrial market rental rate is $3.72 per square foot, considerably higher than the rental rate of the first quarter of 2017, when it was $3.42 per square foot. The average triple net rental rate within both the manufacturing sector (at $3.04 per square foot) and the warehouse/distribution sector (at $3.58 per square foot) have risen over the past year, while the flex/R&D sector rental rate (at $9.42 per square foot) has decreased slightly. There are currently 1,029,657 square feet of industrial buildings under construction within the Cayce/West Columbia and Southeast Columbia submarkets.

Warehouse/Distribution

The warehouse/distribution sector comprises the largest portion of the Midlands industrial market, with more than 42.9 million square feet and has 211,601 square feet currently under construction. The overall market warehouse vacancy rate has fallen from 8.51% during the fourth quarter of last year to 8.33% this quarter, despite 42,000 square feet being added to the North Columbia warehouse market. The warehouse/distribution sector also absorbed 114,040 this quarter. The average triple net warehouse rental rates are currently $3.58 per square foot, slightly higher than the 2017 fourth quarter rental rates of $3.51 per square foot.

Manufacturing

The manufacturing sector in the Midlands is comprised of 22.78 million square feet, and there are currently 818,056 square feet under construction. This sector ended the first quarter of 2018 strong with a positive net absorption of 822,518 square feet. The vacancy rate within the manufacturing sector this quarter is 7.58%, significantly lower than last quarter, when it was 11.19%. In addition, manufacturing rental rates are on the rise; this quarter, the average triple net manufacturing rental rate was $3.04 per square foot, higher than $2.96 per square foot during the fourth quarter of 2017.

Flex/R&D

The Flex/R&D sector in the Midlands has 2.02 million square feet within its submarkets. Vacancy within the flex market decreased from 18.55% during the fourth quarter of 2017 down to 13.68% during the first quarter of 2018 and the market absorbed 98,665 square feet. The average triple net rental rates also rose from $9.36 per square foot during last quarter to $9.42 per square foot this quarter.

Capital Investment & Employment

During the first quarter of 2018, there were $336.5 million in capital investment, accounting for 818 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 saltwater boat manufacturer investment. According to the Federal Reserve data through February of 2018, industrial employment comprises 11.3% of Columbia’s total employment, or about 44.6 million jobs in the Midlands region. From February of last year to February 2018 alone, 200 industrial jobs have been added to Columbia’s employment. Columbia’s central location and convenient access to statewide industrial amenities will draw more investors and employers to the Midlands throughout 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.

Sales

• Amerco Real Estate purchased 200,104 square feet located at 1117 Sparkleberry Lane for $3.9 million.
• 100,000 square feet at 707 Prosperity Drive in Orangeburg was purchased by Brookwood Capital Partners.
• A 39,620-square-foot Class B industrial warehouse in Lexington was sold for $1.7 million.
• Harold Threlkeld purchased a 31,840-square-foot Class B industrial manufacturing building located at 2840 Shop Road for $1.5 million.

Leases

• Xplor Boatworks signed a 11,200-square-foot lease at 303 Quartermaster Street in West Columbia.
• US Auto Logistics leased 9,375 square feet at 3937 Charleston Highway in West Columbia.

Construction Pipeline

Construction activity remains high in the Columbia market, with 1.03 million square feet under construction.

Under Construction

• Construction at the 818,056-square-foot China Jushi manufacturing facility in Southeast Columbia continues.
• Construction continues on the 200,000-square-foot Midway III speculative warehouse in the Lexington County Industrial Park.
• 2102 Beltline Boulevard is the location of an 11,601-square-foot truck terminal.

Completions

• A 42,000-square-foot Class B warehouse located at 1041 Ponderosa Drive in Columbia was completed during the first quarter of 2018.

Market Forecast

The Columbia industrial market is growing, rental rates are rising and the market currently has a high occupancy rate due to ongoing growth within the statewide industrial sector. Throughout the Midlands, there are presently 1.03 million square feet of industrial construction underway and another 200,000 square feet of planned developments. Due to Columbia’s centralized location within South Carolina as well as statewide infrastructure improvements making Columbia accessible to the Port of Charleston, the inland port in Greer and several railway lines, Columbia will become a prime region for industrial occupants to locate or expand, and for investors to enhance their current portfolios.

For additional commercial real estate news, check out our market reports here.

To download the complete report: 2018 Q1 Industrial Columbia Report

 

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