South Carolina Prepares for Industrial Expansion
- Robust interest led to record absorption in the second quarter. South Carolina’s industrial market absorbed nearly 4.9 million square feet leading to a vacancy rate of 7.0%.
- South Carolina’s logistics infrastructure is set for improvements with several projects underway to expand and enhance roads, the Inland Port in Greer and Port of Charleston. These improvements plus the expansion of the Panama Canal will attract future investments to South Carolina.
- Impressive absorption from the strong demand in the market has raised construction levels. Speculative construction is commonplace in Greenville and Charleston whereas Columbia’s construction is currently limited to build-to-suits.
Robust Interest Led to Record Absorption
The industrial market in South Carolina remains active and is expected to continue throughout the remainder of the year. Approximately 4.9 million square feet of industrial space was absorbed during the second quarter of 2016, nearly matching the total net absorption for 2015 of 5 million square feet. The market is expected to continue this expansion as the local and state economies strengthen, the job market continues to grow and South Carolina completes its many infrastructure improvements.
The market vacancy rate was down to 7.4% from 7.9% one year ago, despite the delivery of several vacant buildings to the market at the end of the quarter. These spaces, concentrated in the Lowcountry and Upstate, are in high demand and not expected to stay vacant for long with the current level of absorption. There is an opportunity in the Midlands for significant capital investment and job creation as the former Bose and Knauf Insulations facilities have not been filled. However, demand for space is not limited to large users. Smaller warehouse users are absorbing spaces in multi-tenant buildings while flex space users are struggling to find leasable spaces due to competition with office users.
Industrial asking rental rates are steadily rising in all markets but the Lowcountry has the highest industrial asking rental rate at $5.18 NNN per square foot per year (PSF/YR), up from $4.98 NNN PSF/YR last quarter. The asking rental rate for industrial space in the Midlands was $3.36 NNN PSF/YR compared to $3.49 NNN PSF/YR in the Upstate. The I-77 corridor reported the lowest average asking rental rate at $3.26 NNN PSF/YR, up from $3.18 NNN PSF/YR at the end of the first quarter of 2016.
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