Strong Construction Activity and Major Investments Paved the Way for a Historic Year
- The Charleston, South Carolina industrial market is the tightest it has been in years as vacancy continues to decline and rental rates increase.
- Significant investments were announced throughout the year from major automotive manufacturers that will have both direct and indirect positive effects on the industrial market and overall economy.
- Construction activity is at its highest point in recent years with several buildings delivering in 2015 and others remaining under construction.
- Activity is up at the Port of Charleston, a trend which is expected to continue upon completion of the Panama Canal expansion in 2016.
- The market is poised for continued growth and improvements in 2016.
Industrial Market Continues to Tighten
The Charleston, South Carolina industrial market is embracing the tightest conditions seen in recent years. Demand for space is strong as manufacturers and distributors aim to maximize efficiency and cut operating costs. The total vacancy rate for the market was down to 6.5% at year-end 2015 from 8.6% the previous quarter and 9.1% one year ago. Over 1.7 million square feet of industrial space was absorbed during the year with 1 million square feet absorbed during the fourth quarter alone as a result of several lease signings, expansions, and construction deliveries.
Robust leasing activity leaves few options for quality, large blocks of space in the market. A strong demand exists for industrial space larger than 100,000 square feet, but only a handful of spaces remain available for lease. Speculative industrial buildings will deliver early in 2016 and alleviate some of the demand for such space. Demand also exists for larger buildings greater than 450,000 square feet which are currently not available in the market.
Tenants are competing for space and many are reluctantly accepting renewals rather than relocations and expansions. Rental rates range from $5.00 NNN to $5.50 NNN for new industrial space larger than 100,000 square feet while older space of similar size is leasing for $4.15 NNN to $4.25 NNN. As rental rates for older space climb, some tenants are opting to relocate to speculative space rather than renewing existing space.
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