A nearly 590,000-square-foot speculative building recently came online in Summerville to meet the demand for industrial space in the Lowcountry.
Chicago-based Clarius Partners completed the project, which is in the Omni Industrial Park along Interstate 26. The building accounts for the majority of the 700,000 square feet of speculative industrial space delivered during the fourth quarter, CBRE said in its latest industrial market report.
“Fortunately for Charleston industrial users, consistent market performance is attracting a significant number of out-of-market developers ready to deliver a significant amount of space to the market,” CBRE reported.
In the past two years, more than 3 million square feet of speculative development for industrial tenants has been completed; about 60% has been absorbed, the firm said.
Colliers International said the Charleston region has “an increasingly positive outlook for its industrial market.”
The region’s growth in manufacturing, its logistics sector and activity at the Port of Charleston are attracting developers to invest in new construction, several firms said.
Most noted that Volvo Cars’ first U.S. operation, which includes 1.6 million square feet of manufacturing space in Berkeley County, will likely attract some automotive suppliers and related firms to the area in the coming years. The plant is expected to begin production by the end of the year.
The Mercedes-Benz Vans plant expansion in Ladson also is anticipated to boost industrial activity in the area. It is set to open by the end of the decade.
CBRE reported that 1.2 million square feet of speculative construction is underway in the Lowcountry and that the pace of building is not expected to slow.
Colliers International cautioned that too much new construction in the industrial market could cause an oversupply.
The firm reported that 244,000 square feet of industrial buildings were delivered in the fourth quarter, and an additional 3.7 million square feet of space is under construction. Additionally, 4.4 million square feet of industrial projects have been proposed.
“While Charleston has a positive business environment and a propensity for growth, it may not be able to fill the vast amount of industrial buildings as quickly as they are being delivered,” Colliers said in its report.
Several firms said the region does need more smaller and midsize industrial spaces for tenants. CBRE noted that new construction continues to fall short for midsize tenants in need of modern spaces ranging from 25,000 to 75,000 square feet.
“Among properties in this size range, vacancy has been consistently below the market average,” CBRE said. “To help capitalize, developers may want to consider a multitenant strategy to stabilize larger speculative assets.”
Avison Young said investors are noticing the need for multitenant buildings with spaces ranging from 10,000 to 50,000 square feet. The firm said lease activity remains strong for spaces under 50,000 square feet.
Avison Young also noted that land sales for areas zoned industrial have seen values increase. Land in Jedburg has been valued at $90,000 to $120,000 per acre, and land around Palmetto Commerce Parkway costs more than $200,000 per acre.
“The demand continues to be strong in our area,” Avison Young said.
Cushman and Wakefield – Thalhimer said in its report that industrial sales were strong. LRC Properties paid $42 million for an industrial site at 4500 Leeds Ave. in North Charleston, for example.
Colliers also reported that a 23,000-square-foot manufacturing building at 3350 Meeting St. in North Charleston sold for $1.45 million, and FedEx’s distribution center at 1892 Anfield Road in North Charleston was purchased for $22 million.
“The South Carolina market is buzzing with excitement over the Port of Charleston expansion, the growing automotive manufacturing sector and the anticipation of increased global trade growth,” Colliers said in its report. “Since South Carolina is quickly becoming an industrial hub with international interest, the industrial market can expect to see increased statewide industrial activity, lower vacancy and higher rental rates through 2018.”