Developers explore market opportunities as asking rates hit record high in both the industrial and office sectors

CBRE Research has released the Q3 2016 data on the office and industrial commercial real estate sectors in the Charleston market.

The Charleston market is experiencing a tremendous amount of growth impacting all sectors. Attracting out of market developers and investors, Charleston industrial vacancy declined to 6.3% and asking rates hit a new record high of $5.08 per sq. ft. on a triple net basis after a 20% increase in the past four quarters. Fueled by the automotive industry, port-related logistics and petroleum industries, Charleston’s speculative development is finding success in multiple submarkets including North Charleston/Ladson and the I-26 North.

Of 4 million-plus sq. ft. under construction, over 570,000 sq. ft. is speculative, which can typically speak to a high level of confidence in the market’s ability to absorb new space. Out-of-market developers such as Brookwood Capital Partners, Keith Corp., and Pattillo Industrial Real Estate are currently capitalizing on the industrial growth and will serve as a case study for future activity.
?
The office market is similarly experiencing rapid growth resulting in a low vacancy rate and new record high asking rates at $25.24 per sq. ft. full service. Speculative development is occurring in the Suburban submarkets, while developer response in the Peninsula for office product is proving to be more challenging in the face of more promising returns for multifamily and hospitality. Cap rates have compressed to around 6%, which is on par with larger markets and expected to continue especially for properties with expiring leases.

The following are highlights of each report:

INDUSTRIAL

• Over 790,000 sq. ft. absorbed, lowering vacancy to 6.3%
• Average asking rents top $5 per sq. ft.
• Over 4 million sq. ft. of industrial space is under construction, with over 570,000 per sq. ft. of speculative space.
• I-26 North submarket continues as hotbed for development

OFFICE

• Speculative office development in the Suburbs increases to meet demand and to supply the lack of available space on the Peninsula
• Asking rates increase to $25.24 per sq. ft. FS for the market and $36.41 per sq. ft. full service for Class A space on the Peninsula.
• Vacancies on the Peninsula become even tighter
• New co-work space meets demand for growing tech companies

For more information please visit cbre.com/charleston.