A Growing Demand for Speculative Development

Market Overview

The third quarter of 2014 was accompanied by further tightening of the Charleston, SC industrial market. With almost no Class A space available in the market, buildings of lesser quality experienced the greatest activity through the quarter. The market’s direct vacancy rate was down to 7.1% at the end of the third quarter of 2014, down from 8.2% at mid-year 2014 and 9.0% at the end of the third quarter of 2013. The direct vacancy rate for Class A industrial buildings larger than 100,000 square feet is just 4.7% with less than 600,000 square feet of industrial space available in a handful of buildings. Industrial spaces in the 75,000 to 150,000 square foot range are in the highest demand but shortest supply. Investments and expansions continued despite the high occupancy and limited availability of quality space. Speculative development is crucial for future growth and investment. 

Without completed speculative Class A industrial buildings, the market may lose prospects that have a short lead time and aren’t willing to wait for new space to deliver. This demand for space is being met by some developers, which have several projects in the pipeline. 

Rental rates are on the rise throughout every building class in the market. Some tenants are relocating to Class C space or Class B space which is further away from the port terminals due the increased costs of Class B industrial space. The higher rental rates should prompt the construction of the speculative industrial buildings.

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