Suppliers cache inventory for next supply chain storm

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Although the auto industry held its breath last spring as car sales bottomed out, Colliers International’s Dillon Swayngim says demand for nearby industrial speculative and warehousing space has been on the upswing in the Upstate.

And the pause in production at BMW Manufacturing and other plants only intensified the need for parts from nearby suppliers, the broker said.

Despite a 17% year-over-year drop in sales from the company, business isn’t slow on the BMW factory floor. In fact, since the German automaker operates on a built-to-order schedule, production has been racing to keep up with backlogged demand, he said.

BMW of North America sold 98,750 vehicles during the fourth quarter of 2020, a 2% drop from the year before, according to a company news release. As the manufacturer broadens its market for online custom and retail orders, its sales team expects to increase sales of electric vehicles by 50%.

“Everyone is somewhat in that predicament,” Swayngim said. “And what I think the bigger issue was during COVID was the supply chain routes and the disruption to those supply chain routes.”

The German automaker brought in a flock of tightly linked suppliers to meet the demands of its just-in-time parts requirement. Now the company and its suppliers have taken on a “just in case” mentality, one factor that has sparked a 5% to 8% increase in warehousing absorption within the Greenville-Spartanburg market.

“Warehousing and ‘safety stock’ — another buzzword there — is increasing,” he said. “So you’re seeing that certainly not just in automotive but in manufacturing across the world.”

One example of a supplier making room for greater inventory reserves is MingHua USA, an auto part-manufacturing subsidiary of Chinese Jiangnan Mold Plastic Technology Corp.

The Spartanburg tier-one supplier to BMW recently announced its lease of roughly 132,000 square feet of speculative warehouse space at Woods Chapel Crossing in Duncan, according to Swayngim’s estimates. MingHua products will occupy part of the total 243,280-square-foot, cross-docked logistics facility upon completion, according to a news release.

Swayngim added that the space will also be used for light assembly.

“Despite the challenges levied by the pandemic, the automotive industry is holding steady and flourishing in the Southeast region,” Thomas Koehler, president of MingHua USA, said in a news release. “As production regains momentum, the increased stream of manufacturing has required MingHua USA to conduct a swift expansion. With Wood Chapel Crossing located right down the street from our headquarters, we jumped on the opportunity to occupy this state-of-the-art warehouse, which checks all of our boxes for kickstarting operations to meet the swell in demand.”

The park, developed by Atlanta-based Robinson Weeks Partners, is less than a minute away from MingHua USA's headquarters and three miles from Inland Port Greer. Robinson Weeks Partners is preparing to install a second building, a 221,000-square-foot single-load speculative warehouse, on the site in the months ahead.

“The proximity to critical transportation arteries, access to a strong labor force and favorable economic climate positions Wood Chapel Crossing for future growth and success,” David Welch, CEO of Robinson Weeks Partners, said in the release. “We look forward to engaging other users as we prepare to launch the second phase of development.”

MingHua USA first moved to Spartanburg in 2016, where the company built and purchased its current plastic injection molding plant as part of its promised $45 million investment. The company’s to-do list has swelled with orders from BMW, Volvo, Volkswagen and Tesla ever since.

“In that growth, they secured some contracts and nominations for new cycles of models for different OEMs coming out, and they needed some space,” said Swayngim, who represents Minghua in the lease. “We tested the market and had a look around and ended up deciding to move forward for a couple reasons.”

MingHua does not appear to be alone in this trend and developers are working hard to stay ahead of market demand.

More than 3 million square feet of speculative industrial product is under construction in the Greenville-Spartanburg metro area, according to a recent Colliers International report. The next few months are set to bring 1.9 million more square feet to the market, recognized for its skilled labor pool and rapidly expanding population.

Greenville’s population grew by 19.2% from 2010 to 2019, according to U.S. Census Bureau data from the release, one potential factor in a healthy speculative industrial market.

“There are some great opportunities, build-to-suit sites in Greenville Enterprise Park, Fox Hill Business Park, which obviously is a great product coming out for some of our companies in Greenville,” he said. “All of the Spartanburg industrial market is very heavy surrounding BMW and beyond, down (U.S. Highway) 29 and even further out from there.”

“So, it’s strong. I guess the next thing in line is more absorption. Most of these building are getting absorbed quickly. Very quickly,” he said.