Speculative Construction in the Pipeline

CHARLESTON, SC

Q2-2014 CHARLESTON INDUSTRIAL MARKET REPORT: Speculative Construction in the Pipeline

 

MARKET OVERVIEW

The first half of 2014 was accompanied by increased activity in the small to mid-sized Class B industrial building category. These facilities successfully attracted tenants struggling to find Class A industrial space in Charleston’s tight industrial market.  The market’s direct vacancy rate was 7.71% at mid-year 2014 and was 7.49% at the end of the first quarter of 2014.  This signifies nearly full occupancy. Several blocks of space have become available for sublease. Accounting for these blocks as vacant pushes the total vacancy rate up to 9.78%. The available sublease space is anticipated to lease quickly. Despite this level of building occupancy, the region’s diverse and compelling economic drivers continue to cause existing companies to expand and are leading to more investment in the region. Capable Build to Suit developers with pad ready parcels are in place and ready, but short lead time demand will be difficult to meet without completed speculative Class A developments.

Regional building trade suppliers continued to grow and expand in the market.  Pro Source, a supplier of wholesale flooring and bath products, expanded their presence in Charleston.  Ferguson Supply and Furniture Services also grew their footprints in the market.

Lease rates are on the rise throughout the market with recent lease renewals of Class A bulk industrial space receiving rental rates in the $4.60 to $4.85 per square foot range and Class B rates reaching the $3.75 to $3.95 per square foot range.

 

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INVESTMENTS & EXPANSIONS

• Boeing’s success in Charleston continues to draw suppliers and companies to the region.

o    Senior Aerospace AMT plans to open an office in North Charleston to support Boeing South Carolina operations, creating 60 jobs. The Arlington, Wash.-based supplier manufactures structural parts for large commercial jets.

o    JBE Inc., a Boeing supplier, leased 100,000 SF in North Rhett Commerce Park.

• Coastal Logistics Group, Savannah-based third-party logistics provider and warehouse operator, leased 200,000 square feet in an existing building in McQueen Park in Dorchester County.
• Fruit of the Loom plans to expand its Berkeley County distribution center, adding 402,000 square feet. The expansion, at 1116 Business Park Road in Summerville, more than doubles the center’s current 350,000 square feet. The company expects to break ground in September 2014 and complete the expansion by August 2015.
• Agro Merchants Group plans to open a cold-storage facility in 120,000 SF of the former Piggly Wiggly cold storage warehouse in Berkeley County in August to handle refrigerated cargo.
• Lineage Logistics plans to break ground on a 340,000-square-foot cold storage distribution facility at Palmetto Commerce Park.
• Dupuy Storage and Forwarding, LLC opened its newest coffee warehouse and handling facility in North Charleston to serve the rising levels of imported coffee beans. The company leased a 100,000 square foot facility in North Charleston.
• In Orangeburg, the Jafza Executive Team and state officials executed the documents necessary for the new interchange at I 95 and US 301 for the 1,300 acre industrial park.
• Scout Boats Inc., a manufacturer of sport fishing boats, is expanding its Dorchester County facility.  They plan an additional 30,000 square feet added to its 182,000 square facility in Dorchester County. The other local boat manufacturers are experiencing strong sales as well.
• Moncks Corner-based American LaFrance closed its doors.  The manufacturer of fire, rescue and vocational vehicles closed its warehouse, production and service facilities in Moncks Corner.
• Meter Bearings Group, a designer and producer of ball and cylindrical roller bearings, is establishing its first U.S. manufacturing operations in Colleton County. The company leased a 48,000-square-foot facility, located at Anderson Road in Walterboro,  and plans to begin production by September 2015.
• Innovative Machining Technology purchased 245 Deming Way to use as a CNC Machine shop servicing area wide manufacturers specializing in the power industry. They purchased the building for $ 39 PSF and will be investing further in the facility.
• Comact Equipment US Inc., which began its Charleston operations in 2013, recently announced plans to invest $1.8 million in its Dorchester County facility.

 

 

PORT OF CHARLESTON UPDATE

In total fiscal year to date TEU volume, the South Carolina Ports Authority (SCPA) reported an increase of 7.03% over the same period last year, with 1,535,724 TEUs handled. The SCPA saw strong export growth throughout FY2014, with a 6.54% fiscal year to date increase in export twenty-foot equivalent units (TEUs) handled year over year.

 

The Port of Charleston 2015 Business Plan was recently approved. Management estimates a 3.4% increase in pier container volume over FY2014 totals. Plans include breakbulk tonnage increases of 10%, driven largely by strong performance of state manufacturers.

$20 million in Navy Base Terminal construction costs are budgeted for next fiscal year.

 

The recently signed Water Resources Bill allows ports across the U.S. to prevent delays on harbor deepening projects by beginning construction before the projects receive congressional authorization.

 

In South Carolina, the act will enable the Charleston Harbor Post 45 deepening project to move ahead with construction in September 2015. Deepening Charleston Harbor will allow the Port of Charleston to handle the largest cargo ships in the world.

 

IN THE MONTHS AHEAD

With just a limited number of buildings offering available large blocks of contiguous space, a demand exists for speculative development immediately.  Intense tenant demand has the potential to support higher rental rates required for new development and thus the market is beginning to see speculative development in the pipeline.

 

AROUND THE STATE

COLUMBIA, SC

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

• The first of such projects is a 38,500 square foot industrial building at 1510 Key Road which pre-leased to Trane USA just weeks after being announced.
• A 70,000 square foot speculative building is under construction in the Shop Grove Industrial Park with 35,000 square feet pre-leased to T&C Metals.

 

GREENVILLE, SC

The greatest amount of speculative construction projects are in the Upstate of South Carolina.

• Logue Park currently has 90,000 square feet of Class A industrial space under construction in Greenville County with another 110,000 square foot planned for the park.
• Southchase One involves a $12 million planned 250,000 square foot industrial building in Greenville County.
• Hillside Industrial Park currently has 108,000 square foot industrial building under construction.  The building, being developed by Pattillo Industrial Real Estate, is 100% pre-leased.

 

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