Columbia’s industrial market is healthy

Key Takeaways

  • Tax Reform Section 179 will incentivize owners to upgrade dated industrial buildings as fire marshals crack down on unprotected buildings.
  • Rental rates are anticipated to increase throughout 2018.

Incentive to upgrade

Quality industrial space is quickly absorbed within the Columbia market due to an increasing demand for large square footage requirements and prospects looking to buy or lease industrial buildings within the region. Therefore, current space enhancements are expected now, and new build-to-suit activity will increase during the latter part of 2018 to accommodate these needs. Industrial owners/landlords now have an incentive to upgrade the quality of their current buildings due to the 2018 Tax Reform Section 179 (“Bonus Depreciation”). The new reform was created as an incentive for business owners to invest in themselves by upgrading their equipment and/or software. Section 179 allows for business owners to write off the full purchase price of qualifying equipment; it phases out on a dollar-by-dollar basis after $2,500,000 is spent and the entire deduction goes away when $3,500,000 is reached. This is strong motivation for existing industrial landlords to upgrade dated buildings. These building improvements will enable owners of older industrial buildings to upgrade necessary components and write off 100% of the expense. In addition to a variety of equipment, furniture and software upgrades included under the Bonus Depreciation Tax Reform, improvements to existing non-residential buildings include:

  • Fire suppression
  • HVAC
  • Roofing
  • Alarms
  • Security systems

The demand is strong enough that upgraded buildings will be absorbed and build-to-suit activity will increase; the 2018 tax reform will ensure that while new buildings are attracting tenants, older buildings are not simply overlooked - it will level the playing field within the industrial market and repay owners for modernizing dated industrial spaces.

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