Infrastructure Improvements Position Market For Future Expansion
- South Carolina’s road infrastructure has been a major concern for manufacturing and distribution companies. This quarter, the Senate passed a road bill committing $4 billion in improvements to the most congested segments and bridges of South Carolina’s interstates over the next ten years including the intersection of I-20 and I-26.
- The Midlands industrial market is seeing robust interest with investments from Husqvarna, Southeast Frozen Foods, and Jushi USA this quarter.
- The tightening market in Lexington County is spurring interest for speculative development as current construction is limited to build-to-suit developments.
Rising Rents Leading to Industrial Building Sales
The Midlands industrial market is located in the center of South Carolina, well-positioned to access other regional, national, and global markets by rail, interstate, or port. Interest in the market is intensifying with several investments and expansions from foreign and domestic companies in the second quarter of 2016. The market’s high rental rates and low interest rates are creating a disparity between the cost of leasing versus owning. In some cases it is more affordable for tenants to purchase the buildings they currently lease.
In the second quarter of 2016, the market saw a decrease in the vacancy rate to 8.0% from 8.5% at the end of the first quarter of 2016. Activity remained steady in most counties with only slight changes in vacancy rates and asking rental rates. Despite the overall flat changes in most counties, users showed increased interest in the Lexington submarket and Sumter county dropping vacancy rates in these areas to 3.2% and 8.5%, respectively. At the end of the first quarter of 2016, the Lexington submarket and Sumter county had much higher vacancies at 4.1% and 11.1%, respectively. Sumter’s change in vacancy rate was due to the absorption of 104,600 square feet at 1585 N Wise Drive. In Southeast Columbia, the absorption is due to a 42,000 square-foot lease by Murray Supply Company at 1222 Bluff Road.
Asking rental rates for industrial properties are steadily rising. This quarter, rents for industrial space increased from $3.34 NNN per square foot per year (PSF/YR) last quarter to $3.36 NNN PSF/YR, a change from $3.16 NNN PSF/YR two years ago.
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