Speculative Construction in the Pipeline
The first half of 2014 was accompanied by increased activity in the small to mid-sized Class B industrial building category. These facilities successfully attracted tenants struggling to find Class A industrial space in Charleston’s tight industrial market. The market’s direct vacancy rate was 7.71% at mid-year 2014 and was 7.49% at the end of the first quarter of 2014. This signifies nearly full occupancy. Several blocks of space have become available for sublease. Accounting for these blocks as vacant pushes the total vacancy rate up to 9.78%. The available sublease space is anticipated to lease quickly. Despite this level of building occupancy, the region’s diverse and compelling economic drivers continue to cause existing companies to expand and are leading to more investment in the region. Capable Build to Suit developers with pad ready parcels are in place and ready, but short lead time demand will be difficult to meet without completed speculative Class A developments.
Regional building trade suppliers continued to grow and expand in the market. Pro Source, a supplier of wholesale flooring and bath products, expanded their presence in Charleston. Ferguson Supply and Furniture Services also grew their footprints in the market.
Lease rates are on the rise throughout the market with recent lease renewals of Class A bulk industrial space receiving rental rates in the $4.60 to $4.85 per square foot range and Class B rates reaching the $3.75 to $3.95 per square foot range.
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