Robust Interest Generates Significant Leasing Velocity

Colliers International, South Carolina, Research & Forecast Report
Columbia – Industrial – Q2 2015

Key Takeaways

• Strong leasing activity throughout the first half of 2015 contributed to positive absorption and a decline in vacancy for the Midlands, SC industrial market.
• Manufacturers and distributors continue to expand and establish new facilities in the region.
• Industrial employment, which is comprised of manufacturing and wholesale trade, is increasing and approaching pre-recession levels.
• The Port of Charleston and South Carolina Inland Port are seeing significant activity and provide efficient logistics for industrial users in the Midlands and throughout South Carolina.

 

To download the complete report: Q2 2015 Columbia Industrial Market Report.

 

Market Conditions

The second quarter of 2015 was accompanied by positive absorption, decreasing vacancy and growing capital investments for the Midlands region, which consists of Aiken, Calhoun, Clarendon, Darlington, Fairfield, Florence, Kershaw, Lee, Lexington, Newberry, Orangeburg, Richland, Saluda, and Sumter counties.  The region is receiving recognition for its continued growth and success.  Columbia, SC ranked #5 on The Boyd Company’s recent study, 10 Best Cities to Locate Your Warehouse.

The total vacancy rate for the market was down to 8.9% at mid-year 2015 from 9.6% the previous quarter and 9.8% one year ago.  Several significant leases were signed during the quarter contributing to a positive net absorption of approximately 615,000 square feet.  As a result, few options remain for tenants seeking space in the market.

Chicago Bridge and Iron recently signed a 263,374 square-foot lease and will occupy 375 Metropolitan Drive in the Cayce/West Columbia submarket.  Additionally, Husqvarna Outdoor Products leased 184,453 square feet at 1001 Carolina Pines Drive in the Northeast Columbia submarket.

Robust interest over recent quarters is resulting in a very tight market with few large, contiguous blocks of vacant space.  Currently, only 6 industrial buildings in the Columbia market offer more than 100,000 square feet for lease.  A significant amount of space will be added to the vacant inventory during the third quarter when Bose vacates its manufacturing plant in Northeast Columbia.  The 470,000 square-foot, Class A manufacturing facility is located on 104 acres in the town of Blythewood.  The facility, expandable to one million square feet, has the potential to attract a major manufacturer, which could generate substantial capital investment and job growth for the region.

In response to a shortage of existing supply and inability to meet demand, speculative construction has been gaining momentum throughout South Carolina, with several developments in the Midlands.

 

Speculative Construction

• Lexington County’s speculative industrial building is under construction at Saxe Gotha Industrial Park.  The 120,000 square-foot facility is expected to complete by year-end 2015.  The building is being developed by Landmark Builders, and LCK is serving as project manager.
• Newberry County is developing a 50,000 square-foot speculative industrial building at Mid-Carolina Commerce Park in Newberry County.  The building is being offered for sale or lease.
• Two Class A speculative industrial buildings, 70,000 square feet and 62,500 square feet, located at Shop Grove Industrial Park in Richland County, are nearing completion.  Party Reflections pre-leased 42,000 square feet in the 62,500 square-foot building.  T&C Metals pre-leased 35,000 square feet of the 70,000 square-foot speculative building.
• Recently completed is 1510 Key Road, a 38,500 square-foot industrial building leased by Trane USA.  Boyd Properties developed the building.

 

Investments & Expansions

The Midlands’ business-friendly environment, right-to-work status and skilled labor force are attracting new companies while driving the success and expansion of existing ones.

• AVANTech recently opened its new manufacturing facility and corporate headquarters at 2050 American Italian Way, a 120,000 square-foot facility, in the Southeast Columbia submarket.
• Sun Solutions plans to expand its presence and invest $10.5 million to construct a new 105,000 square-foot building on Old Dunbar Road in West Columbia.
• Republic National Distributing Company, a distributor of premium wine and spirits, is expanding its facility at Lexington County Industrial Park.  The $10 million investment will allow for the addition of 129,500 square feet, bringing the total building size to 335,500 square feet.
• Suominen Corp., a global supplier of nonwovens, plans to expand its existing manufacturing operations in Kershaw County.
• GKN Aerospace plans to expand its existing operations in Orangeburg County.  The aerospace supplier plans to invest $20 million and occupy a new 126,000 square-foot facility adjacent to its existing facility at 348 Millennium Drive.  GKN expected to begin operations at the facility late in 2016 and create more than 75 jobs.
• Inbra Industrias Quimicas, Ltda. is opening its first U.S. manufacturing facility in Orangeburg County.  The $7.7 million investment includes the construction of a new 24,000 square-foot manufacturing facility and the creation of 14 jobs.  The facility, which will be located off of Highway 21, is expected to be operational by mid-2016.

 

Industrial Employment

Industrial employment, which includes the manufacturing and wholesale trade sectors, reported 46,000 jobs in May 2015, accounting for 12.2% of total non-agricultural employment in the Columbia, SC MSA.  The industrial employment sector has been growing in recent years and is approaching pre-recession levels.  Peak industrial employment was in February 2007 with 49,100 jobs.  Approximately 1,500 industrial jobs were added to the MSA from May 2014 to May 2015, 29.4% of total non-agricultural jobs added during that period.

 

 

South Carolina Ports

The Midlands region is centrally located between South Carolina’s Port of Charleston and Inland Port in Greer.  The presence of the ports contributes to the state’s efficient logistics, driving industrial and manufacturing success.  In 2014, $29.7 billion worth of goods were exported from South Carolina, 13.1% more than 2013.  China was South Carolina’s top exporting partner with more than $4.2 billion in exports.  South Carolina ranked first for exports of tires and completed passenger motor vehicles in the United States and ranked seventeenth in exports overall.

 

Port of Charleston

In June 2015, the Port of Charleston handled 169,914 twenty-foot equivalent units (TEUs), an increase of 13.9% over June 2014.  The Port of Charleston handled 1.9 million twenty-foot equivalent units (TEUs), an increase of 14%, during South Carolina Ports Authority’s 2015 fiscal year that ended June 30.

 

South Carolina Inland Port

The South Carolina Inland Port (SCIP) in Greer exceeded container count expectations during its first full year of operations.  SCIP posted another record in May 2015 with 5,845 rail lifts.  The port’s current users include BMW and Adidas.

 

Market Outlook

The remainder of 2015 is likely to bring new of investments to the Midlands industrial market.  Sales activity is expected to spike in the upcoming quarter as investors aim to take advantage of the current low interest rate before the speculated increase in rates later this year.  Vacancy is expected to decline further, and rental rates are likely to climb as a result.  Speculative construction will gain momentum as remaining available blocks of space are absorbed.

 

Around the State

A growing demand for industrial space throughout South Carolina is attributing to tightening markets and soaring rental rates, creating a need for new industrial construction.  Major markets around the state, such as Charleston and Greenville, are beginning to see build-to-suit and speculative office construction.  Investments continue to be made throughout the state.

 

Charleston, South Carolina

Charleston is on its way to becoming an automotive manufacturing hub following recent announcements from Volvo and Mercedes-Benz Vans.

• Just two months after Mercedes-Benz Vans, a division of Daimler, made an announcement to invest $500 million in a new manufacturing facility in Charleston, another major automotive manufacturer, Volvo Cars selected South Carolina for its first American plant.  The $500 million facility will be located in Berkeley County and is expected to create 2,000 new jobs over the next decade and up to 4,000 jobs by 2030.
• Mercedes-Benz Vans, a division of Daimler, announced plans earlier this year to invest $500 million in a new Sprinter van plant in Charleston.  Construction on the new plant is expected to begin in 2016.
• MeadWestvaco and SunCap Property Group recently broke ground on a 350,856 square-foot, Class A speculative industrial building at North Pointe Business Campus on North Rhett Avenue in Hanahan.

 

Greenville, South Carolina

• Scannell Properties and Strategic Capital Partners recently broke ground on a 155,000 square-foot speculative facility to be located off Highway 290 in Hillside Enterprise Park.  This is the first of up to six buildings ranging from 100,000 to 500,000 square feet.
• Construction is complete at White Horse Industrial Center, which is home to two new industrial facilities.  The $20 million project being developed by Exeter Property Group and Burnham Partners adds 306,000 square feet of industrial space to the existing inventory with a graded building pad designed to accommodate 234,000 square feet.

 

For more statewide commercial real estate news check out our market reports at: www.colliers.com/southcarolina/insights

 

To download the complete report: Q2 2015 Columbia Industrial Market Report.