Colliers Report: South Carolina industrial construction delivers despite the pandemic

Research & Forecast Report
Q3-2020 SOUTH CAROLINA | INDUSTRIAL

Key Takeaways

• The South Carolina industrial market absorbed 1.95 million square feet during the third quarter of 2020, dropping the vacancy rate to 6.97%.
• There are 26 buildings totaling 4.33 million square feet under construction and 32 buildings proposed to be built which will add approximately 6.57 million square feet throughout the state upon completion.

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Quarterly S.C. Market Overview

The South Carolina industrial market is comprised of 447.97 million square feet within 6,961 buildings. During the third quarter of 2020, the market absorbed 1.95 million square feet, 1.86 million square feet was absorbed within warehouse space. Due to the positive absorption, the overall vacancy rate in South Carolina industrial properties decreased significantly from 7.18% during the second quarter of 2020 to 6.97% this quarter. There are also 26 buildings totaling 4.33 million square feet under construction and 32 buildings proposed to be built which will add approximately 6.57 million square feet throughout the state upon completion. The South Carolina triple net weighted market rental rate for the remaining available industrial space increased 5% over last quarter and averaged $4.25 per square foot during the third quarter of 2020.

Augusta | Aiken (South Carolina portion)

The South Carolina portion of the Augusta | Aiken market is comprised of 13.59 million square feet, over half of which is manufacturing space. No new industrial buildings were delivered to this market; however, the 40,000-square-foot AmbioPharm expansion continued construction. Augusta | Aiken submarkets stalled during the third quarter of 2020 and posted no absorption; therefore, the vacancy rate remained 13.14%. The weighted rental rate for the South Carolina portion of the Augusta | Aiken region averaged $2.91 per square foot during the second quarter of 2020.

Charleston

The Charleston industrial market has 58.51 million square feet of industrial inventory with 954,630 square feet under construction. In addition, there are approximately 18 buildings proposed to be built within the Charleston market which would add an additional 4.69 million square feet to the industrial inventory. The Charleston submarkets absorbed 561,249 square feet during the third quarter of 2020 led by the North Charleston and Summerville submarkets. Due to the high amount of positive absorption, the overall market vacancy decreased from 9.28% last quarter to 9.14% this quarter. The overall market average triple net weighted rental rate increased this quarter to $5.99 per square foot.

Charlotte (South Carolina portion)

The South Carolina portion of the Charlotte submarket has an industrial inventory totaling 40.03 million square feet, and there are currently 87,500 square feet of warehouse space currently under construction. No new industrial buildings were delivered in the South Carolina portion of Charlotte this quarter. The Charlotte market absorbed 39,123 square feet, all of which was within warehouse space. As a result, the overall quarterly market vacancy rate decreased marginally from 9.86% during the second quarter of 2020 to 9.76% this quarter. Average weighted rental rates for the remaining industrial space averaged $3.90 per square foot during the third quarter of 2020.

Columbia

The Columbia industrial market is comprised of 73.18 million square feet. During the third quarter of 2020, the industrial market absorbed 229,640 square feet led by the warehouse sector. No new industrial buildings were delivered to the Columbia market during the third quarter; however, one building is currently under construction at 397 Millennium Drive in Orangeburg which, upon completion, will add 65,000 square feet to the market. Due to positive absorption, the quarterly vacancy rate dropped from 4.24% during the second quarter of 2020 to 3.93% during the third quarter of 2020. The overall average market rental rate for available industrial space was $4.31 per square foot during the third quarter of this year.

Florence | Myrtle Beach

The Florence | Myrtle Beach market is comprised of 38.57 million square feet of industrial properties and absorbed 94,400 square feet during the third quarter of 2020; 75,650 square feet was absorbed within warehouse space, while 18,750 square feet was leased within manufacturing space. No new buildings were delivered to the market during the third quarter of 2020, but construction continues on one warehouse which, upon completion, will add 109,200 square feet to the market. Due to the minimal positive absorption and vacant 200,200-square-foot warehouse completing, the vacancy rate increased from 6.80% last quarter to 7.03% during the third quarter of 2020. The overall Florence | Myrtle Beach weighted rental rates increased to $4.18 per square foot this quarter.

Greenville-Spartanburg

Comprised of approximately 214 million square feet, there are approximately 1.97 million square feet among 10 buildings under construction and approximately 1.26 million square feet proposed to begin construction throughout the Greenville-Spartanburg market. There were no new buildings delivered to the market this quarter. During the third quarter of 2020, the market absorbed 965,135 square feet. Consequently, the quarterly vacancy rate decreased from 7.12% last quarter to 6.69% during the third quarter of this year. According to Costar, the overall weighted rental rate during the third quarter of 2020 decreased slightly from last quarter and averaged $3.43 per square foot.

Savannah (South Carolina portion)

The Savannah market within South Carolina has approximately 10.32 million square feet of industrial space and the market absorbed 63,750 square feet, most of which was within warehouse space. There is one 17,500-square-foot warehouse under construction, however, no new buildings delivered to the market during the third quarter of 2020. Due to positive absorption, the overall quarterly vacancy rate decreased marginally from 3.50% last quarter to 2.88% this quarter. Savannah’s triple net weighted rental rate averaged $4.10 per square foot during the third quarter of 2020.

Market Forecast

Pandemic shopping trends has led to an escalation of e-commerce and is boosting the need for cold storage facilities near logistic pipelines. In addition, positive port activity and enhanced logistics continue to shift toward the East Coast from the West Coast; therefore, an increase in the number of new companies moving into South Carolina is anticipated. Construction of speculative industrial buildings will likely increase the vacancy rate throughout the South Carolina market; however, demand is expected to eventually catch up to the new deliveries and absorb vacant buildings. Thus, South Carolina is a prime spot for growth leading to increased activity throughout the state into next year.

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.