Welcoming the First Wave of Speculative Construction
The Columbia, SC industrial market ended a significant year with a downward trending vacancy rate, increasing rental rates, sales transactions and new speculative construction. 2014 ended with a total vacancy rate of 5.95%, down from the third quarter 2014 vacancy rate of 6.29% and year-end 2013 vacancy rate of 7.28%. The Northeast Columbia submarket, with a fourth quarter 2014 vacancy rate of 13.13%, remains home to the greatest amount of quality large blocks on contiguous industrial space despite showing the great improvement over the year. Each quarter this year was accompanied by positive absorption and a declining vacancy rate bringing the total net absorption for 2014 to just over 1 million square feet. With just 6 buildings offering over 100,000 square feet of industrial space for lease, a demand for new supply is apparent.
In an effort to meet the demand for new speculative industrial space, several projects are under construction and planned for the market for the first time since 2008. Earlier this year, the first speculative industrial building delivered, 100% pre-leased to Trane USA. The 38,500 square foot industrial building was the first of three buildings to be developed by Boyd Development. Two buildings, 70,000 square feet and 62,500 square feet, remain under construction at Shop Grove Industrial Park. Party Reflections recently pre-leased 42,000 square feet in the 62,500 square foot building. T&C Metals pre-leased 35,000 square feet of the 70,000 square foot speculative building during the third quarter of 2014.
Additionally, Lexington County is working with Landmark Builders to develop at 120,000 square foot speculative industrial building in Saxe Gotha Industrial Park. Successful pre-leasing of the buildings is likely to spur further speculative development as the market vacancy rate continues to decline. A challenge oftentimes faced is the gap in current rental rates and those required for new construction. As rental rates increase as a result of diminishing supply, the gap will shrink making speculative and build-to-suit construction feasible options for investors and owners.
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