Lee & Associates Q2 2014 Market Report
July 23, 2014
GREENVILLE, SC-
INDUSTRIAL
“Planes, Trains & Automobiles”: To recap from Lee & Associates-Greenville’s market reports from the beginning of 2014, construction and development has been occurring at a rapid pace all over the Upstate. With new space and new faces coming to the industrial market, existing companies are also taking advantage of the healthy rental rates and favorable market conditions by expanding their efforts within our area. This impact can be seen in the industrial market with a nearly complete Inland Port, a large announcement from BMW, and numerous suppliers and manufacturers ready to “state their engines” and make their mark on the Upstate. The Greenville/Spartanburg industrial market has been able to produce strong positive net absorption rates for all of 2014. For the second quarter of 2014, CoStar reports a positive net absorption of 428,489 square feet. This compares to a positive 274,326 square feet in the first quarter of 2014. Rental rates continue to increase as well. The average quoted rental rate for available industrial space was $3.30 per square foot per year at the end of the second quarter. This represents a 0.9% increase in quoted rental rates from the end of the first quarter 2014, when rents were reported at $3.27 per square foot. Vacancy also decreased to 8.6% this quarter. Over the past four quarters, the market has seen an overall decrease in vacancy, with the rate going from 7.3% in the third quarter 2013, to 7.1% at the end of 2013 and 6.9% at the end of the first quarter 2014.
FLEX
“I Think I Can, I Think I Can”…just like the brave Little Engine That Could, the Greenville/Spartanburg flex market is working hard to get over the mid-year “mountain”. Over the course of the past year and half, it appears that the flex market has been on track towards becoming a power player in the market. However, with an increase in vacancy rates, and a negative net absorption for the first time in over a year, it appears that the flex market may have come a little derailed moving into the middle of 2014. The flex building market recorded a net absorption of negative 12,769 square feet for the second quarter of 2014. This is the first quarter that this discipline has experienced a negative absorption in 9 quarters. This newly negative data is likely the attributing factor to the flex market’s increase in vacancy at this point in the year. At the end of Quarter 1 2014, the flex market reported a vacancy rate of 9.4%, which was a decrease from 9.9% at the end of Quarter 4, 2013. Regardless of the decrease in demand for existing space, rental rates increased to $7.15 at the mid-year mark of 2014. At the beginning of the year, rates were reported at $7.10 per square foot and had ended 2013 at $6.86 per square foot. These figures are chugging right along in an upward trend.
OFFICE
The office market is back to the future. As 2013 drew to a close, all disciplines in the commercial real estate market were bustling with the excitement and activities associated with new construction and development in the Upstate. It truly appeared that tenants and owners alike were jumping at the chance to be a part of any trendy, hip, new office space being developed in the Greenville area. While this is great news for our vacancy rates and rental rates, where will the market take us now that the music has stopped (for the time being)? In order to make a scientific estimate on where we are going, it is important to see where we have been. Net absorption for the overall Greenville/Spartanburg office market was negative (8,233) square feet in the second quarter of 2014. To further understand these numbers, let us break down the information by class of office space. The Class-A office market recorded the highest net absorption of the entire discipline with a positive 20,278 SF absorbed in the second quarter of 2014. Class B space recorded a negative net absorption of 24,127 SF and net absorption in the CBD was positive 16,921 SF. The office vacancy rate remained at 8.7% at the end of the second quarter 2014. The vacancy rate was 8.7% at the end of the first quarter 2014. Rental rates for available office space, all classes, was $14.27 per square foot per year at the end of the second quarter .This represent at 0.9% increase in quoted rental rates from the end of the first quarter 2014, when rates were $14.14 per square foot.
RETAIL
If you’ve got it, flaunt it! The Greenville/Spartanburg retail market did not experience much change in market conditions in the second quarter of 2014. But if you’re climbing the charts for being the next “big place” to be, what I there that needs changing? As we saw at the end of 2013, the Upstate is emerging as a retail destination with something to offer everyone from fashionistas to artists, and everyone in between. With the completion of projects such as Project One and new tenants moving into Magnolia Park on Woodruff Road daily, and the latest announcement of the Laurens Road redevelopment, Greenville is definitely “in vogue” right now. Over the course of the past two years, the Greenville/Spartanburg retail market has only deviated slightly from an average vacancy rate of 6.8%. This quarter proves to be right on trend with a reported vacancy rate of 6.9% at the end of Q2. Retail net absorption was slightly positive in Greenville/Spartanburg for the second quarter of 2014 with positive 73,014 square feet absorbed. Rental rates are also up over previous quarter levels and also from their levels four quarters ago. The quoted rents ended the second quarter of 2014 at $9.27 per square foot per year. That compares to $9.24 per square foot in the first quarter 2014.
To view the detailed reports for each market, visit: http://www.lee-commercial.com/resources/market-reports
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