Significant Year of Investments and Speculative Construction

Colliers International | South Carolina – Q4-2014 Greenville Industrial Market Report

 

MARKET OVERVIEW

The Greenville/Spartanburg industrial market ended a year full of significant sales and leasing activity, new speculative construction and noteworthy capital investments.  Sales activity was robust as investors and occupiers took advantage of low interest rates and rising rental rates.  The total vacancy rate for the industrial and flex space in the overall market was down to 7.1% at year-end 2014 from 7.7% the previous year.  Over 1.5 million square feet of industrial and flex space were absorbed during the fourth quarter of 2014 bringing the total net absorption for the year to approximately 2.9 million square feet.  Strong leasing volume along with several buildings delivering to the market fully occupied attributed to the large positive absorption.

Speculative construction, which was absent from the market for years, gained momentum throughout the year with several buildings delivering, others under construction, and more planned for 2015.  Over recent years, the Greenville market underwent significant growth and attracted new manufacturers to the region growing the demand for industrial space, which has been rapidly diminishing in supply.  This growing demand for industrial space along with a downward trending vacancy rate motived new construction, both build-to-suit and speculative, throughout the market.  While new construction requires higher rental rates and longer lease terms due to rising construction and labor costs, increasing market rental rates are making new construction a feasible option.

Earlier this year, a 156,000 square foot Class A speculative building delivered at Caliber Ridge Industrial Park in Greer, SC.  The building was developed by Liberty Property Trust and is 100% occupied.  Most recently, a speculative building delivered at 25 Logue Court.  The building offers up to 90,000 square feet and is expected to lease quickly.  Several buildings remain under construction including two buildings at Caliber Ridge Industrial Park and two buildings at White Horse Industrial Center, all of which are scheduled to deliver in 2015.  Upon completion, the buildings will add over 850,000 square feet of Class A industrial space to the market inventory.  The added supply will help attract prospective tenants and give existing tenants options to grow; however, further construction is needed for continued market growth as demand far exceeds supply.

Speculative industrial buildings are successfully pre-leasing and attracting tenants to the market, which offers efficient logistics, a talented workforce and a thriving economy.  According to the Upstate SC Alliance, 57 companies invested over $3.8 billion in new investments and expansions throughout 2014 in the Upstate region.  The investments are more than three times those of 2013, which totaled $1.1 billion.  Of the 2014 investments, the largest came from Toray Industries Inc. and BMW Manufacturing Co., both international companies, which announced investments of $1 billion each.  Over $13.2 billion have been invested in the Upstate since 2007, 28% of the total was invested in 2014 alone.  Capital investments from both foreign and domestic companies are expected to continue, bringing job growth and economic development to the region.

 

INDUSTRIAL MARKET

The overall vacancy rate for industrial space in the Greenville/Spartanburg market was down to 7.0% at the end of 2014 from 7.5% at the end of the third quarter of 2014 and 7.6% at year-end 2013.  The Anderson, Greenville and Spartanburg industrial vacancy rates were 4.5%, 7.4% and 6.4%, respectively.  Asking rates averaged $3.05 NNN for the market, up from the third quarter 2014 and year-end 2013 average rates of $2.91 NNN and $2.83 NNN, respectively.  The highest rental rates were found in Greenville County, where rents averaged $3.19 NNN at year-end 2014, up from $3.00 the previous year.  Limited supply, coupled with the delivery of new industrial buildings, is driving rental rates upwards, a trend which is anticipated to continue into 2015.

 

FLEX MARKET

The Greenville/Spartanburg flex market ended 2014 with an overall vacancy rate of 10.7%, lower than the third quarter 2014 vacancy rate of 11.2% and the year-end 2013 vacancy rate of 10.9%.  The average asking rental rate increased to $7.01 NNN from $6.53 NNN at the end of the third quarter and $6.46 NNN at the end of 2013.  Greenville County has the greatest amount of flex space in the market and had a vacancy rate of 10.7% at year-end 2014 with asking rental rates averaging $7.22 NNN.

 

INVESTMENTS & EXPANSIONS

Over $47 million worth of investments were announced during the fourth quarter of 2014, which are expected to generate about 379 jobs.

• Solar Atmospheres, a commercial heat treating company, plans to make Greenville County home to its first Southeastern facility.  The company is making a $15 million investment and will occupy a 54,000 square foot facility at 108 Progressive Court.
• SPF North America, Inc. recently announced plans to invest $12 million to expand its Greenwood County plant.
• Stanco Metal Products Inc. is planning a $5.9 million expansion in Anderson County.  The company will be expanding into a 64,100 square foot facility at Alliance Boulevard.
• FoxFarm Soil and Fertilizer Company is investing $6.9 million and will occupy a 60,000 square foot facility in Anderson.

 

2014 – YEAR IN REVIEW

The investments made in 2014 were more than three times the investments made in 2013 and accounted for 28% of total investments since 2007.  Toray Industries Inc. and BMW Manufacturing Co. announced the largest investments, each planning to invest $1 billion in the Upstate.

 

• BMW Manufacturing made a monumental announcement at a press conference late in the first quarter of 2014 following the completion of a $900 million expansion which began in 2012.  The company shared plans to invest $1 billion and create 800 additional jobs to build a new X7 model at the company’s plant in Greer, SC.
• Also during the first quarter, Toray Industries Inc., a Tokyo-based aerospace industry supplier to clients such as Boeing, announced plans to invest $1 billion in Spartanburg County.  The company plans to create 500 jobs over the next 10 years and is building a plant on 400 acres along Highway 290.  Recently, Toray was awarded an extension to its Boeing contract, which makes it the sole carbon fiber producer for the Boeing 777X.
• Carbon Resources Recovery SC LLC is investing $20 million in a new Anderson County facility and plans to employ 30 people.  The company, which uses tires to manufacture renewable energy products, expects construction to be complete by the end of 2015.
• Copac Global Packaging, Inc. completed its $14.8 million Spartanburg County expansion early in 2014.  The company added 50,000 square feet of manufacturing space and expects to create 32 jobs.
• Eberspaecher North America Inc. leased the 285,000 square foot building that was once fully occupied by Adidas in Spartanburg.  Colliers International helped the developer and supplier of exhaust technology, vehicle heating and air conditioning systems choose the location in order to be closer to one of their major customers, BMW Manufacturing Co., in Greer.
• Best Distributing leased 40,020 square feet of industrial space at 2220 Pine Street in Spartanburg.  The company is also located at 2514 New Easley Highway in Greenville and is expanding to meet their current demand.
• First Quality Tissue SE LLC is investing $350 million to add 1 million  square feet to its plant on Masters Boulevard in Anderson County.
• Trelleborg Wheel Systems chose Anderson County for its first North American operations facility.  The $50 million investment will open an agricultural radial tire manufacturing operations facility that will create approximately 150 jobs by 2018.  The facility will be located in a new 430,000 square foot building.
• Electrolux announced plans to invest an additional $30 million over the next two years in its Anderson County facility.  Since 2011, the company has invested $30 million, of the originally planned $48 million, in the facility.

SOUTH CAROLINA INLAND PORT UPDATE

The South Carolina Inland Port (SCIP) in Greer, SC has been open for more than a year, providing rail service to the Port of Charleston.  BMW Manufacturing and Adidas are confirmed users of the port.  BMW Manufacturing relocated its export operations to a new 413,000 square foot building on property owned by the Greenville-Spartanburg International Airport.  Land remains available and is expected to attract other users and distributors.  Additionally, suppliers to the automotive and aerospace industry are target users as the port offers efficient logistics to their clients.  The presence of the SCIP is expected to bring new manufacturers and distributors to the market.

 

IN THE MONTHS AHEAD

2015 will be accompanied by declining vacancy rates and increasing rental rates.  Sales will continue as interest rates remain low and rental rates climb further.  Several speculative development projects will deliver and are expected to lease successfully spurring further speculative development.  Build-to-suit construction is also expected to gain momentum as the supply of available quality space remains limited.  Job creation and investment will continue as companies benefit from the South Carolina Inland Port, accessibility to the Port of Charleston and a talented labor force.

 

AROUND THE STATE

Quality industrial space is becoming increasingly scarce throughout South Carolina motivating speculative construction to begin throughout the state.

 

CHARLESTON, SOUTH CAROLINA

• Jamestown and Childress Klein broke ground on a 274,000 square foot Class A speculative industrial building at Crosspoint at Palmetto Commerce Park, which is expected to deliver by mid-year 2015. Childress Klein recently pre-leased space, leaving only 130,000 square feet available for lease.
• Additionally, Pattillo Industrial Real Estate began clearing a site at Palmetto Commerce Park, which will be home to a new 142,000 square foot speculative industrial building that will be expandable to 400,000 square feet.

 

COLUMBIA, SOUTH CAROLINA

Speculative construction has been absent from the market since 2008, but several projects are currently in the works.

 

• Earlier this year, the first speculative industrial building delivered, 100% pre-leased to Trane USA.  The 38,500 square foot industrial building was the first of three buildings to be developed by Boyd Development.
• Two buildings, 70,000 square feet and 62,500 square feet, remain under construction at Shop Grove Industrial Park.  Party Reflections recently 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 during the third quarter of 2014.

 

FOR MORE STATEWIDE COMMERCIAL REAL ESTATE NEWS CHECK OUT OUR MARKET REPORTS HERE.

 

To download the complete report click the link: Q4:2014 Greenville Industrial Market Report.

 

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Colliers International South Carolina has over 140 staff members, including 60 real estate professionals. Total brokerage volume for the firm in 2013 was approximately $350 million involving over 550 sales and leasing transactions. Colliers International is the largest manager of commercial property in South Carolina and is an Accredited Management Organization (AMO) through the Institute of Real Estate Management (IREM), with a portfolio of approximately 11.2 million square feet of office, industrial, retail and healthcare properties. Colliers International’s staff holds 45 professional designations, the most of any firm in South Carolina.