Activity Surrounds Speculative Development
- Speculative development continues but rising costs are causing developers to become more creative.
- Construction continues with build-to-suit facilities taking the lead. Speculative development is expected to follow.
- Greenville’s industrial market is increasingly landlord driven.
Rising Costs for Speculative Development
The majority of available space in the market is newly delivered, Class A, speculative buildings with an inventory of 100,000 square feet or more. Nearly 21 million square feet of industrial space has delivered since the turn of the century in the Greenville/Spartanburg industrial market, 60% of which has delivered over the last five years. Speculative buildings have been leasing quickly in the market, reasoning that the market can sustain the new speculative development in the pipeline.
The vacancy rate for buildings delivered since 2011 is 10.5%, significantly higher than the market vacancy rate of 7.1% for industrial space. These buildings are expected to be absorbed prior to the delivery of speculative buildings currently under construction. The average asking rental rate for buildings delivered since 2011 is $4.53 NNN PSF/YR, 34.4% higher than the market average asking rental rate of $3.37 NNN PSF/YR.
Speculative construction is not slowing down but developers are mitigating risk by building flexibility into their projects. Some developers wait for a tenant’s requirements, others build walls with knock-out panels to add dock doors, ventilation, windows or entrances to meet tenant specifications. Speed to market is important to the site selection process for companies in the industrial sector. The companies investing in the Upstate region require existing speculative industrial buildings or shovel ready sites so they can occupy the building as quickly as possible. This is due, in large part, to deadlines imposed by their end customer which in many cases is BMW.
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