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Upstate industrial market continues to be tight

Real Estate - Commercial
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According to reports from Colliers International and CBRE, the industrial property market, much like the office and retail markets, remains tight in the Upstate.

Over the first quarter of 2016, the total vacancy for industrial and flex space hovered at just more than 7%, and net absorption was just over 1.6 million square feet for the second consecutive quarter, according to CBRE estimates.

“While current speculative development speaks to the health of the market, the demonstrated success of new development in the present cycle could inspire a new round of speculation,” said Brian Reed, CBRE research manager, in a statement.

Colliers reported the total vacancy rate held steady due to new space being delivered vacant and that the flat rate “does not accurately depict robust interest and activity in the market.”

According to Colliers, industrial speculation construction in the Upstate includes:

  • 545 Brookshire Road in Spartanburg County, a 240,020-square-foot speculative building being developed by Beacon Partners.
  • Flatwood Industrial Park, a 363,000-square-foot industrial building being developed by Johnson Development Associates.
  • Building 1 at Logue Park, a 110,000-square-foot building in Greenville County, is complete and was developed by Cothran Properties.
  • Wingo Park in Spartanburg County — Becknell Industrial completed a 175,000-square-foot building at the park.

“The market tightening over recent years is down 8.0% one year ago and 10.1% five years ago,” the Colliers report said.

There is currently 1.4 million square feet of speculative development under construction in the market, and drivers of the industrial market in the region continue to be the Interstate-85 corridor, the S.C. Inland Port at Greer and the proximity to the Port of Charleston, which CBRE reported was the third-fastest growing port in terms of TEUs moved in the United States in 2015. TEUs are a common cargo industry unit of measure for 20-foot equivalent units.

“As transportation costs and labor costs continue to make up larger portions of total operational costs, companies look for ways to enhance their supply chains with efficient logistics,” the Colliers report said.

Both reports indicated the new openings of Volvo Cars and Mercedes Benz Vans, both in Charleston, could have “modest” impact to the region, specifically to the automotive suppliers already located in the market. In addition, BMW Manufacturing Co. is in the midst of completing a $1 billion expansion and upgrade to its Upstate facility. The investment will add 800 jobs and allow the facility to produce the X7 model and increase the overall output of the facility to 450,000 annually.

“Some BMW suppliers are already looking to increase capacity in order to accommodate Mercedes and Volvo and may need to expand their existing facilities or relocate into larger space,” the Colliers report said.

The CBRE report said there’s 165 million square feet of rentable industrial space in the Upstate with a vacancy rate of 7.2%. Of that, the most space available in the region is warehouse-distribution, of which 10.3% of 68 million square feet remain vacant compared with 4.4% of the 89.5 million square feet of manufacturing space available. The report also indicated there is approximately 6 million square feet of industrial property under construction.

Anderson County, with 1.6 million square feet, and Spartanburg County, with 3.8 million square feet, make up a bulk of where the industrial construction is taking place. The western part of Spartanburg County has 2.2 million square feet of industrial construction planned or underway. Greenville County has 555,000 square feet of industrial construction underway. The CBRE report indicated that 4.5 million square feet of construction is dedicated to property encompassing 250,000 square feet and more.

Colliers reported the build-to-suit construction in the Upstate includes:

  • Magna International — Construction is underway on the company’s 165,000-square-foot facility at The Matrix Park. Completion is scheduled for June.
  • Rite Aid — Construction of the 900,000-square-foot facility at the Flatwood Industrial Park is nearing completion and will culminate in the consolidation of three Rite Aid distribution centers.
  • Dollar Tree — The company is constructing a 1.5 million-square-foot distribution facility on the border of Cherokee and Spartanburg counties.
  • Techtronic Industries — This 1.3 million-square-foot facility is nearing completion in Anderson County.

In the first quarter of 2016, more than $63 million in investments was announced for the region, with most concentrated in Greenville and Spartanburg counties, according to Colliers.

“Oconee County is gaining attention and successfully recruiting business,” the Colliers report said. “The micropolitan statistical area of Seneca … or Oconee County, was recently named among the top micropolitan statistical areas in the nation.”

Among the expansions were:

  • Baxter Enterprises, a $20.7 million investment in an 87,000-square-foot facility and the addition of 87 jobs at the Oconee Industry and Technology Park.
  • Total Quality Logistics — The Greenville County site is the company’s third operation in South Carolina, and it will add 75 jobs over the next three years.
  • Fitesa Simpsonville Inc. is investing $52 million to expand its Greenville County operation. The expansion will add 20,000 square feet and add 38 jobs.
  • Proper Polymers is making an investment of $15.8 million to add 50,000 square feet of space to its current Greenville County facility. The building will be expandable to 100,000 square feet.
  • Sun City Produce will occupy a 113,000-square-foot facility at The Matrix Park and add 81 jobs over five years.
  • Bosch Rexroth is investing $5 million to expand its Fountain Inn facility.
  • Greenco Beverage is building a 130,000-square-foot distribution center on Poinsett Highway in Greenville County.
  • Daimler Trucks is investing $22 million to expand into Cherokee County. It will build a logistics center and expand operations.
  • D&W Fine Pack is investing $20 million to expand its Laurens County facility and add 60 jobs over five years.
  • Ushers Machine & Tool Co. is investing $12.5 million and adding 50 jobs inside a renovated 72,000-square-foot facility.
  • Essex Weld Solutions will move into a 15,000-square-foot warehouse and establish operations in Cherokee County. The $2.6 million investment is expected to add 70 jobs.

Looking ahead to the rest of the year, Colliers said the region’s “industrial market is poised for continued success through the remainder of 2016.” Vacancy rates will continue to drop, while the demand for space will continue to grow.

“However, activity will become constrained as new speculative developments are absorbed and options for quality space become limited,” the report said. “A need exists for additional construction, but land sites will become scarce as available, developable sites with infrastructure in place are built out.”

 

Reach Matthew Clark at 864-720-1222.

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