The Upstate, South Carolina

Transcription

1 The Upstate, South Carolina Office Market Experiences Negative Absorption The muchanticipated pullback in the market for Greenville office leasing has arrived. This is clearly demonstrated in the first quarter numbers for The office vacancy rate for increased as did the vacancy rate in the Central Business District (CBD). For the first time in over a year, Greenville experienced negative absorption during the quarter. This has resulted in substantial landlord competition to acquire tenants that are new to the market as well as existing tenants. While the market for office leasing may be cooling off, the opportunity to invest in owning Greenville office space remains attractive. There have been some significant transactions this quarter with more in the pipeline. The 21,200 square sf Infinity Marketing building at 874 South Pleasantburg Drive sold for $2.9 million dollars. At the time of sale, it became a 10 year saleleaseback with a 7.45% cap rate. Legacy Square at Hollingsworth Park was another notable transaction for the quarter. The entire 20,631 sf were fully leased at the time of sale netting a 7.5% cap rate and a $4.6 million dollar price tag. Both investors and owner/users are eager to purchase office buildings in Greenville even as interest rates begin to rise. Small businesses realize their ability to achieve their goals with a small footprint. Over the last few of years, this has led to a steady increase in the demand for coworking space. Landlords in Greenville s office market have responded with an increase in the supply. Institutional style coworking spaces are advancing in the market, such as Serendipity Labs, which has found a home at Plush Mills. However, it can also be observed that many private landlords are choosing to fill their vacancies by signing multiple leases with individual office users. It may be expected that this trend will progress into the foreseeable future. Spartanburg continues to see a steady decrease in office vacancies. The need for increased office space will be satisfied in the near future as some of Spartanburg s big projects near delivery. Even with new spaces soon to enter the market, it is likely to be observed that lease rates in Spartanburg will further climb.

2 Upstate Market Facts 20,217,886 sf $20.36 psf Submarket Indicators Anderson County 4.2% 3.8% 3.9% 3.9% 4.3% 3.7% 5.3% 4.6% 4.8% 4.9% $11.57 $10.57 $10.55 $9.13 $9.07 Cherokee County 15,688,614 15,688, % 9.7% 9.9% 11.4% 13.3% 12.1% % 12.9% $21.17 $20.70 $20.40 $20.38 $19.86 Laurens County 91,236 Pickens County Spartanburg County 5.1% 5.4% 5.6% 6.2% 6.2% 6.8% 6.3% 10.8% 11.2% $15.35 $15.23 $15.65 $15.63 $15.65

3 Upstate Market Overview All Submarkets 20,217,886 20,217, % 8.6% 8.9% % $20.36 $19.75 $19.57 $19.61 $19.13 Net Absorption (85,247) 174,639 49, ,230 92,145 Submarket Map

4 s s Net Absorption 13% 12% 11% 1 9% 8% 7% YE13 YE14 YE15 YE16 YE17 YTD18 $22 $20 $18 $16 $14 $12 $20.36 YE13 YE14 YE15 YE16 YE17 YTD18 250, , , ,000 50, , , ,000 4Q16 (85,247) Notable Lease Transactions Tenant Type Address Market SF NAI Earle Furman, LLC 101 E Washington Street 18,578 The City of Greenville Original 68 Global Drive 4,728 Hitachi Solutions America LTD 25 E Court Street 4,500 Verticle, LLC Original 1335 Nazareth Church Road Spartanburg County 4,450 RingoFire Digital 135 S Main Street 3,200 Notable Sales Transactions Buyer Address Market SF Sale Price Olive Branch Properties, LLC 340 Rocky Slope Road 20,361 $4,600,000 Tritium Trio, LLC 874 S Pleasantburg Drive 21,200 $2,900,000 Bruzzone FPC, LLC 793 E Butler Road 4,358 $1,952,632 San Giusto Estate, LLC 121 Commerce Boulevard Pickens County 4,800 $1,425, North Main, LLC N Main Street 8,245 $1,350,000 Trends to Watch Power Shift Power shift to tenants in the Greenville CBD; supply outweighs demand. Flight Flight to peripheral submarkets. Little Movement Little movement with mid to large block tenants.

5 Office Terms and Definitions Asking Rent The dollar amount asked by landlords for available space expressed in dollars per square foot per year in most parts of the country. Office rents are reported as base rent (NNN). The asking rent for each building in the market is weighted by the amount of available space in the building. This has the effect of causing rental rates on larger spaces to affect the average more than that of smaller spaces. The weighted average asking rental rate is calculated by taking the ratio of the square footage associated with the rental rate on each individual available space to the square footage associated with rental rates on all available spaces, multiplying the rental rate by that ratio, and then adding together all the resulting numbers. Asking rental rate averages only includes Direct Space that is being offered for lease directly from the landlord or owner of a building and does not include Sublet Space that is being offered by another tenant trying to sublet a space that has already been leased. Greenville Contact Information Christopher B. Fraser, CCIM Principal, Managing Director chris.fraser@ Rhett Craig, MBA Associate rhett.craig@ Chris Prince, MBA Associate chris.prince@ Net Absorption The net change in physically occupied space over a period of time. Office Building Classifications Avison Young adheres to the BOMA guidelines. Class A properties are the most prestigious buildings competing for premier office users with rents above average for the area. Class B properties compete for a wide range of users with rents in the average range for the area. Class C buildings compete for tenants requiring functional space at rents below the area average. Submarkets Submarkets are nonoverlapping, contiguous geographic designations having a cumulative sum that matches the boundaries of the Market they are located within. The Upstate Although loosely defined among locals, The Upstate is the region in the westernmost part of South Carolina, which is inclusive of Anderson, Cherokee, Greenville, Laurens, Pickens and Spartanburg counties. The city of Greenville is the largest city in region with the highest population, and is the base of most commercial activity. The cities of Spartanburg and Anderson are next in size. Total Square Footage Office inventory includes all multitenant and single tenant buildings at least two stories containing 20,000 square feet. Vacancy and Availability The vacancy rate is the amount of physically vacant space divided by the inventory and includes direct and sublease vacant. The availability rate is the amount of space available for lease divided by the inventory. Researcher Comments Market research data and transaction information provided by CoStar. For more information on this report, please contact: Charlene Aydelotte Massey Business Operations Manager, Researcher charlene.massey@ Meghan McDuff Marketing Coordinator meghan.mcduff@ 511 Rhett Street Suite TwoB Greenville, South Carolina United States 2018 Avison Young South Carolina, Inc. All rights reserved. E. & O.E.: The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Avison Young.