Vacancy Decreases While Rental Rates Stabilize.
The industrial market in the Upstate of South Carolina absorbed just under 1.5 million square feet of space in 2011. With this level of activity, market vacancy decreased from 10.3% at year-end 2010 to 9.3% at year-end 2011. The largest new transactions of the year included the 293,000-square-foot lease by Confluence Water Sports at Greenville Commerce Center and the 197,000-square-foot lease to Global Automotive Partners at Hillside Industrial Park in Spartanburg. While these two transactions accounted for approximately 30% of the annual absorption in 2011, the market was largely dominated by transactions ranging from 50,000 square feet to 60,000 square feet in size. New leases falling in this category included Dare Foods, VCI, Gics Foods, Span Contract Packaging, Action 3PL, Delta Power Tool and Equipment, Ply Gem Siding Group and ABC Supply.
The upstate economy added 3,500 new jobs in 2011, primarily in the transportation and business services sector. While growth in the transportation sector had a positive impact on the Upstate industrial market through the addition of new 3PL groups, activity in the manufacturing sector was much less substantial. The market has not experienced growth in the manufacturing sector since the onset of the last economic downturn. Although the market is well into economic recovery, new manufacturers have yet to relocate to the Greenville region due to continued problems in the housing markets and the inability for workers in other markets to sell their homes. Without flexibility in relocating executives it remains difficult for large operations to relocate or enter new markets.
Rental Rates stabilized in 2011 as Class A space became increasingly difficult to find. Although the market continued to tighten, there were no plans for speculative construction at year-end 2011. The next twelve months will bring continued absorption, and will hopefully see a return of advanced manufacturing growth in the Upstate. The market will likely not experience speculative construction until rental rates reach the $4.00 per square foot range, which will not occur until substantial build-to-suit activity occurs.
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