Upstate Industrial Market Begins 2015 with Investments and Construction

Colliers International, South Carolina: Research & Forecast Report – Greenville, Industrial Q1 2015

 

To download the complete report: Q1 2015 Greenville Industrial Market Report.

Key Takeaways

• Speculative construction is gaining momentum throughout the market.
• Investments continue to pour into the Upstate.
• South Carolina Inland Port (SCIP) exceeds expectations for first year.

 

Market Conditions

The Greenville/Spartanburg industrial market continues to grow and improve, attracting manufacturers and automotive suppliers to the region, which is home to major companies, BMW Manufacturing and Michelin North America, among others.   Companies excel in the market and are supported by a skilled workforce, low unionization, favorable operating costs and the presence of the South Carolina Inland Port (SCIP) in Greer, South Carolina.

SCIP, which opened in November 2013, offers daily service to the Port of Charleston via Norfolk Southern rail lines.  The inland port exceeded expectations during its first full year of operations, moving 42,555 containers in 2014.  August 2014 was the most active month with 4,770 lifts.  BMW Manufacturing and Adidas are among more than 10 port users.  Last year, 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.  The presence of SCIP is expected to bring new manufacturers and distributors to the market, which can benefit from efficient logistics and cost effectiveness.

Strong interest and activity in the Upstate is evidenced by the consistently high occupancy in the market.  The overall vacancy rate for combined industrial and flex space was 7.9% at the end of the first quarter of 2015, down from 8.4% one year ago.  The market has been more than 90% occupied for over 3 years, providing a diminishing supply of available industrial and flex space and limited options for tenants.

An apparent demand and need for new supply is motivating new construction throughout the market, both build-to-suits and speculative construction.  Increasing market rental rates are encouraging developers, which were once reluctant to break ground given the higher rental rates and long-term leases required for new construction.  The gap between market rates and those for new industrial space is diminishing, making new space a feasible option for many tenants.

 

Highlighted Developments

South Carolina as a whole is running in short supply of large blocks of quality industrial space, motivating development throughout the state.  The Upstate was first to experience a new wave of construction and continues to be home to the greatest activity with both private and public funded developments.

• Scannell Properties is set to break 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.
• Cothran Properties recently completed construction on 25 Logue Park, the first building in a new industrial park, Logue Park at Pelham.  The 90,000 square-foot building delivered 100% pre-leased.  Colliers represented the tenant in the transaction.  Construction is set to break ground soon on a second building in the park, a 110,000 square-foot Class A industrial building.
• Becknell Industrial plans to construct a 175,000 square-foot speculative industrial building at Wingo Park in Spartanburg County.
• Anderson County plans to develop a 50,000 square-foot speculative industrial building, expandable to 200,000 square feet on 24.9 acres at Alliance Business Park.
• Liberty Property Trust is finalizing its build-out of Caliber Ridge Industrial Park with a 156,000 square-foot shell.

 

Industrial Space

The overall vacancy rate for industrial and warehouse space in the market was 7.7% at the end of the first quarter of 2015, holding steady of the year.  Significant activity in the market has kept the vacancy rate under 10% for almost 5 years.  Greenville and Spartanburg Counties are home to the majority of industrial space in the Upstate, making up 77.6% of the market inventory.  The two counties had vacancy rates of 8.7% and 6.3%, respectively at the end of the first quarter.  The highest industrial rental rates are in Greenville County with asking rental rates averaging $3.42 NNN at the end of the first quarter, increasing 11.0% over one year and 17.5% since Q1 2013.  Rental rates are expected to climb further as new construction delivers.

 

Flex Space

The overall vacancy rate for flex space in the market was 10.7% at the end of the first quarter of 2015.  While the market has seen activity over recent quarters, momentum lags that of industrial space.  Overall, asking rental rates averaged $7.75 NNN, increasing 20.5% in just one year.  Anderson and Greenville Counties are home to some of the lowest vacancy rates and highest asking rental rates in the market.  The vacancy rate for Anderson County flex space was 9.8% with asking rental rates averaging $10.89 NNN.  The Greenville County vacancy rate was 10.6% at the end of the first quarter and asking rental rates averaged $7.73 NNN.

 

Investments & Expansions

Capital investment continues to be strong in the Upstate, which experienced record high investment in 2014.   Over $4 billion were invested in the Upstate in 2014, almost 4 times greater than 2013 investments.  The region attracted international attention with 60% of 2014 investments coming from foreign companies.  Thus far in 2015, over $135 million worth of investments have been announced.  Capital investments are expected to continue and be on pace with 2014.

• Rite Aid Corp. recently announced plans to relocate its distribution facility from Charlotte to Spartanburg County.  The $90 million investment is expected to create 600 jobs.  Rite Aid plans to start operations at the new distribution center in March 2016.
• Kobelco Construction Machinery USA Inc. plans to establish a new 156,000 square-foot manufacturing facility in Spartanburg County, which is expected to complete in December 2015.  The Japanese firm plans to invest $41 million in the facility and create 131 jobs.
• Schaeffler Group USA plans to invest $1.4 million towards expanding its Spartanburg plant.
• Polydeck Screen Corp. plans to invest in a $12 million expansion expected to create 40 jobs over the next five years.  The firm recently acquired a 36,400 square-foot facility next to its existing facility.
• PecTec Corp., a supplier of metal products to the automotive industry, plans enter the market and invest $2 million in a 11,600 square-foot facility at 130 Corporate Drive in Spartanburg County.
• Coca-Cola Bottling recently announced plans to relocate from Mauldin to Anderson County, creating a new 150,000 square-foot regional sales and distribution center.  The $13.5 million project is expected to complete in 2016.

 

 

Market Outlook

A tighter industrial market is likely for 2015, which will accompanied by increasing rental rates and new construction.  Successful pre-leasing of speculative developments will spur further construction as investors reap the benefits of the highly occupied market.  Capital investments are expected to continue from both national and international companies.  Automotive suppliers will continue to show interest in the market.  SCIP will likely attract new distribution and manufacturing companies to the region.

 

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 Columbia, are beginning to see build-to-suit and speculative office construction.  Capital investment continues to grow throughout the state.

 

Charleston, South Carolina

Activity in Charleston has been on the rise in recent years, a trend that is expected to last for a while.

• Mercedes-Benz Vans, a division of Daimler, recently announced plans to invest $500 million in a new Sprinter van plant in Charleston.  Construction on the new plant is expected to begin in 2016.  The manufacturer is expanding its facility at 8501 Palmetto Commerce Parkway and will use the new plant to manufacture next-generation Sprinter vans to supply the North American market.  This noteworthy investment will likely attract suppliers to the region.
• MeadWestvaco is breaking ground in May on North Pointe Building C, a 350,760 square-foot cross dock building at the North Pointe Business Campus on North Rhett Avenue.
• Childress Klein and Jamestown recently completed construction on Building 4 at Crosspoint at Palmetto Commerce Park, a 273,000 square-foot, rear loaded, multi-tenant building in North Charleston.  The building delivered with over 50% occupancy.  Future plans include up to 10 industrial facilities on 75 acres.

 

Columbia, South Carolina

High occupancy and increasing rental rates in Columbia make new construction a feasible option for tenants looking for space in the market.  As a result, the market is welcoming its first wave of new construction.  Sales remain strong as investors benefit from low interest rates and a tight market.

• Two Class A speculative industrial buildings, 70,000 square feet and 62,500 square feet, remain under construction at Shop Grove Industrial Park in Richland County.  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.
• Lexington County is working with Landmark Builders to develop a 120,000 square-foot speculative industrial building in Saxe Gotha Industrial Park.
• Reger Holdings expanded their South Carolina portfolio with the acquisition of three properties totaling $10.4 million.  The properties acquired were in Gaffney, Bishopville and Columbia.

 

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

 

To download the complete report: Q1 2015 Greenville Industrial Market Report.

 

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