Colliers Report: Statewide industrial demand intensifies

Research & Forecast Report
Q3-2018 SOUTH CAROLINA | INDUSTRIAL

Key Takeaways

• Statewide industrial activity is rapidly increasing; South Carolina industrial properties absorbed 4.17 million square feet during the third quarter of 2018.
• Rental rates are expected to continue rising as more quality space is delivered statewide.
• Positive industrial activity is expected to continue into 2019 as the demand for manufacturing facilities and warehouses increases.

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Market Conditions

The South Carolina industrial market is comprised of 413.17 million square feet within 6,741 buildings. Throughout South Carolina, 2.97 million square feet of new industrial buildings were delivered to the market during the third quarter of 2018, and 10.11 million square feet are currently under construction. Despite the delivery of new industrial construction, the South Carolina industrial markets absorbed 4.17 million square feet this quarter and the overall S.C. market vacancy rate dropped from 7.95% during the second quarter of 2018 to 7.60% during the third quarter of this year. The average triple net South Carolina market rental rate for the remaining available industrial space increased from $3.71 per square foot last quarter to $3.92 per square foot during the third quarter of 2018.

Augusta | Aiken (South Carolina portion)

The South Carolina portion of the Augusta | Aiken market consists of 10.46 million square feet, half of which is manufacturing space. No new industrial buildings were delivered to this market; however, there is a 40,000-square-foot manufacturing building currently under construction. This market posted a net negative absorption of 50,600 square feet during the third quarter of 2018; likewise, the Augusta | Aiken market vacancy rate rose from 12.35% last quarter to 12.84% this quarter. The weighted rental rate for the South Carolina portion of the Augusta/Aiken region remained relatively the same and averaged $2.53 per square foot during the third quarter of 2018.

Charleston

The Charleston industrial market has 51.43 million square feet of industrial inventory. There were three new warehouses and one new flex/R&D building completed this quarter which added 325,147 square feet to the Charleston market. In addition, there are 9.26 million square feet of buildings under construction, and the demand is keeping pace with the construction delivery at this point. The market vacancy rate dropped considerably from 9.24% during the second quarter of 2018 to 8.02% this quarter, as a result of the 923,455 square feet of market absorption. Over half of the absorption was within warehouse space.

Charlotte (South Carolina portion)

The South Carolina portion of the Charlotte submarket has a total industrial inventory totaling 36.71 million square feet, and one warehouse in the Riverwalk Business Park was delivered this quarter adding 507,512 square feet to the market. In addition, there are four warehouses totaling 487,256 square feet under construction in this region. This market absorbed 329,648 square feet this quarter. However, the vacancy rate increased slightly from 8.05% during the second quarter of 2018 to 8.05% during the second quarter of 2018. The South Carolina portion of the Charlotte market average weighted rental rate was $7.05 per square foot.

Columbia

The Columbia industrial market is comprised of 68.41 million square feet within 1280 industrial buildings. 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, the average triple net industrial rental rates remained basically the same at $3.78 per square foot through the second and third quarters.

Florence | Myrtle Beach

The Florence | Myrtle Beach market has 37.40 million square feet of industrial inventory, and three warehouses totaling 244,502 square feet are currently under construction. This market absorbed 268,294 square feet and the vacancy rate decreased from 13.81% last quarter to 12.63% this quarter. The triple net average weighted rental rate increased to $3.02 per square foot.

Greenville | Spartanburg | Anderson

The Greenville-Spartanburg-Anderson industrial market is comprised of 3,000 buildings totaling approximately 198.9 million square feet. During the third quarter of 2018, 10 buildings adding 2,133,050 square feet of new industrial space to the market were completed. In addition, there are currently eight proposed warehouses and two proposed flex/R&D buildings, which will add 1,213,820 square feet to the region, if completed. The overall market vacancy rate dropped from 6.06% during the second quarter of 2018 to 5.74% this quarter, and the market absorbed an astounding 2,635,826 square feet of industrial space. Also, during the third quarter of 2018, the average triple net weighted rental rate rose to $3.52 per square foot, up 3.53% from the second quarter 2018 rental rate of $3.40 per square foot.

Savannah (South Carolina portion)

The Savannah market, within South Carolina, has 10.01 million square feet of industrial space and there is one 16,800-square-foot warehouse currently under construction. This market absorbed 52,110 square feet during the third quarter of 2018 and the vacancy rate dropped from 6.51% during the second quarter of this year to 5.97% during the third quarter of 2018. In the South Carolina portion of the Savannah market, the triple net weighted rental rate rose 52.84% over the second quarter rent; the third quarter rental rate average was $4.31 per square foot.

Significant Transactions

According to CoStar, there were 136 sale transactions during the third quarter of 2018, including the sale of a Piedmont manufacturing facility that was purchased by Oak Street Real Estate Capital for $158 million. There were 92 lease transactions during the third quarter of this year, including a 176,461-square-foot lease by Belk, Inc. at 110 Belk Court in Blythewood and a 170,000-square-foot lease by Garden State Lumber at 810 Bistline Court. Several of the leases were signed by undisclosed tenants.

Construction Pipeline

Under Construction

• Construction continues for the 2.5 million-square-foot Michelin distribution center located on Highway 101 in Spartanburg County. The delivery of the first phase is expected this year.
• The Omni Industrial Campus, in Berkeley County, has over 1,025,288 square feet currently under construction. These buildings will deliver in stages, but all are expected to be completed by early 2019.
• Construction at the 818,056-square-foot China Jushi manufacturing facility in southeast Columbia continues.
• Electrolux Additions is constructing an 800,000-square-foot manufacturing building in Anderson County.
• Sundaram Clayton is constructing a 660,000-square-foot manufacturing building in the Summerville market.
• 479 Trade Center continues construction on the 622,677-square-foot manufacturing building in Summerville.
• Construction continues at the Inland 85 Logistic Center in Greer. The Logistic Center is the largest speculative building in the market, consisting of 500,280 square feet. The delivery date for this project is expected to be year-end 2018.
• Spartan Ridge Logistics Center at 2010 Nazareth Church Road in Spartanburg is adding a spec building comprised of 273,000 square feet, and the projected completion date is November 2018.
• Spartan Exchange, located at 1021 Tyger Lake Road, is a 213,200-square-foot, Class A distribution/manufacturing facility under construction in Spartanburg.

Completions

• Volvo completed its 2.1 million-square-foot Class B manufacturing facility in Ridgeville.
• Mercedes Sprinter Van completed construction of its 1.2 million-square-foot manufacturing facility at 8501 Palmetto Commerce Parkway in North Charleston.
• Plastics Omnium completed construction at a 650,000-square-foot plant in Greer at 310 Genoble Road.
• Site B in the Riverwalk Business Park, located in Rock Hill, completed a 507,512-square-foot warehouse during the third quarter of 2018.
• Construction completed on a 408,000-square-foot spec building in the Hillside Enterprise Industrial Park, located near I-85 and Highway 290 in Duncan, SC.
• 343,150 square feet of warehouse space was completed within the Charleston Logistics Center in Summerville.
• 222 GSP Logistics Parkway completed the delivery of phase three of construction within the 271,890-square-foot Class A warehouse building.
• Pacolet Milliken Enterprises, Inc. completed a 200,000-square-foot warehouse at Midway Green Industrial Park, located at 260 Midway Dr in Union, SC during the third quarter of 2018.
• Buildings A (which is a spec building) and B (which is preleased to Global Automotive Partners), located on Apple Valley Road in Greer, SC, completed construction.
• Wingo Park has one building that completed this quarter and consists of 171,600 square feet at 2725 New Cut Road.

Market Forecast

Incredible logistic capabilities, new regulations regarding 11-hour drive time for truck drivers and record-breaking port shipping activity enhances the S.C. industrial market appeal for owners, companies new to the market and investors. There are currently 9.90 million square feet of buildings under construction, and 5.75 million square feet of industrial buildings proposed to be built across the state. The demand is keeping pace with the steady stream of supply; positive statewide absorption is expected to continue into the first quarter of 2019. Rental rates are also expected to rise quarter-over-quarter as high-quality industrial buildings are added to the statewide inventory.