Ending the Year with New Speculative Construction
Activity was strong in 2014 for the Charleston, SC industrial market, which ended the year with a total vacancy rate of 7.5%, down from 8.7% at the end of the third quarter of 2014 and 8.4% at year-end 2013. Leasing activity was healthy with approximately 2.4 million square feet leased throughout 2014, including both new direct leases and renewals. New direct leases accounted for 1.8 million square feet. The net absorption for the year was over 1.3 million square feet reflecting optimism and growth in the market. Efficient logistics supported by the Port of Charleston, a talented workforce, and growing economy collectively attract new manufacturers and support the growth of existing ones in the region. Charleston ranked #21 on the Urban Land Institute’s US Markets to Watch: Overall Real Estate Prospects in 2015. Charleston ranked well in all commercial real estate property types, and the industrial sector is among the top performing. Low unionization rates and labor costs coupled with available talent and the presence of companies such as Boeing puts Charleston on the map and in the minds of investors and manufacturers.
The industrial market has a limited supply of quality industrial space, leaving few options for new companies looking for space and restricting growth of existing companies, which are limited by the space they occupy. With the vacancy rate continuing on a downward trend and rental rates climbing further, build-to-suit and speculative construction projects are beginning to break ground and will become more feasible options, adding supply to the existing inventory. A current challenge is the higher rental rate and long-term lease required for new construction, but as the rental rate continues to increase, the gap between current rates and asking rates for new supply will diminish, motivating new speculative construction.
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