The Upstate, South Carolina Vacancy Down and Absorption Up The first quarter of 2018 ended on a rather remarkable note, posting the largest decrease in industrial vacancy in the last eight quarters. This data is impressive both because the quarter ended with the lowest vacancy rate since the Great Recession, but also one of the greatest quarterly drops in the same period. Another noteworthy factor is that the net absorption rate was nearly double the quarterly average of the preceding five quarters. Contributing to this jump were large spaces taken by BMW, Illinois Tool Works, Productions Unlimited, and Moore Food. Rents, however, have hovered within a tight range. For the previous four quarters, direct triple net rents have stayed between approximately $3.24 and $3.19, where they finished the first quarter of 2018. Other key trends to observe are: Greer Inland Port traffic, unemployment rates, uncertainly of skilled labor and changing monetary policy. The Greer Inland Port, which has been an effective lubricant to the export-heavy upstate economy, is on track to grow it s year-over-year container volume by approximately 5%. The project to deepen the Charleston Harbor, to be completed by 2020, will make Charleston the deepest port on the East Coast and is expected to create a competitive advantage that will benefit Upstate manufacturing and positively impact industrial development. The unemployment rate in Upstate South Carolina has remained below pre-recession levels of 5% since late 2015. At face value this is good news, however, new investments will require additional skilled labor - both in the construction trades and in the manufacturing sector. Since trade school enrollment rates often drop during strong economies, and given the current climate surrounding immigration, it is difficult to forecast where the next wave of much-needed skilled laborers are going to come from. This is likely to be an observable trend, as it has a trickle-down effect on the industrial real estate market. The overall consensus is that fed policy will continue to tighten, which may impact industrial development and business investment decisions in the Upstate. Furthermore, the Upstate s quality of life, low cost of living, and access to export markets provide relative strength in attracting labor and industry.
Upstate Market Facts 180,836,365 sf 8.9% $3.19 psf Submarket Indicators Anderson County 20,777,045 20,730,990 20,730,990 20,680,990 20,680,990 4.2% 3.7% 3.8% 4.2% 7.4% 7.1% 6.5% $2.56 $2.52 $2.46 $2.29 $2.31 Cherokee County 7,686,664 8.5% 8.8% 15.0% 15.5% 15.5% 14.8% 14.5% 20.5% 24.0% 25.3% 2.71 63,610,826 63,425,516 63,053,671 63,053,671 63,009,671 5.5% 5.5% 4.9% 4.7% 5.1% 9.6% 11.2% 10.8% 9.8% 8.6% $3.82 $3.76 $3.81 $3.74 $3.70 Laurens County 11,545,933 11,545,933 1.5% 1.7% 1.8% 1.7% 1.4% 1.8% 4.5% 5.2% $2.07 $2.08 Pickens County 6.8% 8.1% 8.1% 7.8% 7.9% 14.0% $2.86 $2.18 $2.58 $2.62 $2.59 71,612,524 71,180,404 70,855,648 70,183,198 70,011,598 6.5% 6.9% 6.7% 6.8% 7.2% 9.4% 9.2% 9.1% $3.01 $3.15 $3.18 $3.27 $3.23
Upstate Market Overview All Submarkets 180,836,365 179,972,880 179,276,279 178,478,829 178,263,229 5.9% 5.8% 5.8% 6.1% 8.9% 9.8% 9.3% $3.19 $3.21 $3.24 $3.24 $3.20 Net Absorption 1,236,979 495,503 699,392 755,544 1,119,046 Submarket Map
s s Net Absorption 8% $4.00 2,000,000 7% 6% $3.50 $3.00 $3.19 1,750,000 1,500,000 1,250,000 1,000,000 1,236,979 5% $2.50 750,000 500,000 4% YE13 YE14 YE15 YE16 YE17 YTD18 $2.00 YE13 YE14 YE15 YE16 YE17 YTD18 250,000 0 4Q16 Notable Lease Transactions Tenant Type Address Market SF Pratt Industries 1410 Old Stage Rd 121,000 Jarden Plastic Solutions 1221 S Batesville Rd 112,455 Think Tank Brew Law Original 101 Airport Rd 25,000 Moventas Inc. 380 Business Pkwy 20,956 Builders Wholesale Flooring Original 228 Pelham Davis Cir 12,500 Notable Sales Transactions Buyer Address Market SF Sale Price SunCap Property Group 201 Forrester Dr - 3 Buildings 237,647 $14,429,916 Illinois Tool Works, Inc. 50 Beechtree Boulevard 243,500 $8,250,000 625 S. Old Piedmont, LLC 625 S Old Piedmont Hwy 400,000 $6,800,000 Apple Glen Investors, LP 120 Brooks Blvd 204,104 $3,300,000 322 Rhett Street Partners, LLC 322 Rhett Street 12,237 $2,450,000 Trends to Watch Low Vacancies Supply scarce due to low vacancies. Skilled Labor Uncertainty of skilled labor force. Industrial Investment Monetary policy may impact industrial investment.
Industrial Terms and Definitions The dollar amount asked by landlords for available space expressed in dollars per square foot per year in most parts of the country. Industrial 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 Rob Howell, MBA Senior Vice President 404.493.3904 rob.howell@ Tabitha Cooper Associate 989.615.2109 tabi.cooper@ Net Absorption The net change in physically occupied space over a period of time. Industrial Buildings Classifications Industrial buildings are categorized as warehouse/distribution, general industrial, R&D/flex and incubator based on their physical characteristics including percent office build-out, clear height, typical bay depth, typical suite size, type of loading and typical uses. Submarkets Submarkets are non-overlapping, 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 Industrial inventory includes all multi-tenant, single tenant and owner occupied buildings at least 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 843.725.7200 charlene.massey@ Meghan McDuff Marketing Coordinator 864.301.8379 meghan.mcduff@ 511 Rhett Street, Suite Two-B Greenville, South Carolina 29601 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.