The industrial and commercial real estate market in the Charleston region remains strong. Vacancy rates are decreasing as net absorption of space continues to outpace new construction. Rental rates are increasing as the market tightens. Major trends driving the local market include foreign direct investment and reshoring bringing both manufacturing and distribution users to the area. Infill sites remain desirable but users are also looking to the Jedburg submarket. The region benefits from its quality of life, business climate, and growing port infrastructure which will help attract more investment in the future.
4. www.CharlestonCommercialMarketForecast.com
NATIONAL/REGIONAL TRENDS
National:
ā¢ 21 quarters of positive net absorption
ā¢ 6.7% vacancy
ā¢ Rental rate growth is up 3.5% YOY.
Tighter markets in the 5% range
ā¢ Demand outpacing new product delivery
in most major markets
ā¢ Cap rates compressed
ā¢ Cargo shift
ā¢ Projected occupancy gains of 380mm SF
in warehouse/distribution space from
2014-2017
Regional:
ā¢ Mirrors national trends relative to
absorption, rent growth and vacancy
rates
ā¢ Significant speculative and BTSFL
development underway in larger regional
metros such as ATL, CLT, GSP and SAV
6. www.CharlestonCommercialMarketForecast.com
LOCAL TRENDS
TYPE OF ACTIVITY?
ā¢ FDI driving SC economy
ā¢ Balanced mix of manufacturing and
distribution
WHERE?
ā¢ Prospects prefer āproject readyā locations
ā¢ Infill traditionally preferred location but that
is changing
ā¢ Jedburg sub-market activity has increased
significantly
WHY?
ā¢ Favorable business climate
ā¢ Right to Work
ā¢ Infrastructure
ā¢ Clustering
ā¢ Reshoring trend
ā¢ Itās Charlestonā¦
Relative to prior period
Market Indicators+
Vacancy
Net absorption
Construction
Rental Rate
+ +
Note: Construction is the change in Under Construction
*Projected
Q2 2015 Q3 2015*
+Source: Colliers International
WRK ā Active projects by type
54% Manufacturing
45% Distribution
1% Other
7. LOCAL TRENDS
ā¢ Mix of leasing and sales
ā¢ Notable transactions
ā¢ Rent Growth
ā¢ Class A rents pushing north
of $5/sf (light mfg related)
ā¢ Class A distribution space
now in the upper $4/sf
range
ā¢ Speculative Development
ā¢ Childress Klein
ā¢ Patillo
ā¢ WestRock/SunCap
ā¢ Atlas Commerce
ā¢ More to come???
ā¢ Strong demand for particular
product types
ā¢ Light manufacturing
ā¢ 20,000 ā 50,000 SF
conditioned space
Source: JLL
8. www.CharlestonCommercialMarketForecast.com
Case Study:
GERBER CHILDRENSWEAR
Market Impact?
ā¢ $33mm in investment
ā¢ 100-125 jobs
ā¢ Further reinforces/validates the Jedburg market
as viable location for large distribution projects
Why Berkeley County?
ā¢ Logistical advantages (proximity to Port and growth markets)
ā¢ Favorable business climate
ā¢ Available economic incentives
ā¢ Operational cost efficiencies to be achieved
Why Rockefeller ā MWV Foreign Trade Zone Park?
ā¢ Speed to market/site readiness
ā¢ Confidence in Development teamās ability to deliver
ā¢ Costs
ā¢ Connectivity to future Exit 197 along with Nexton
amenities and housing
ā¢ Class A environment and neighboring tenants help to
ensure long term valuation of asset
9. www.CharlestonCommercialMarketForecast.com
STRENGTHS
Quality of life
Breadth of industry
Strong Port
Pro-business leadership
OPPORTUNITIES
Momentum
Ability to attract and retain talent
Public/Private collaboration
WEAKNESSES
Lack of product
Perception that CHS is too expensive
THREATS
Infrastructure
Workforce availability
SWOT
10. STRENGTHS
www.CharlestonCommercialMarketForecast.com
WHAT DO COMPANIES WANT?
-Site readiness
-Attractive business environment (taxes, incentives,
permitting)
-Labor Pool (cost, availability, education, skill level,
training)
-Infrastructure/global access (transportation
infrastructure, energy costs, intermodal
capabilities, certified sites)
-Quality of life
11. www.CharlestonCommercialMarketForecast.com
THREATS
ā¢ Workforce
ā¢ Perception among site consultants
ā¢ Perfect our value proposition
backed by facts
ā¢ Quantify via labor study
ā¢ Infrastructure
ā¢ Needed: $1.4B per year until 2040
ā¢ Estimated 1/3 of SC primary and
interstate roads are in poor -
mediocre condition
ā¢ Current gas "user
fee": $0.16/gal
User fee has not increased since
1987
ā¢ 4th lowest in nation
ā¢ User fee does not increase with
price of fuel. Revenues grow via
consumption
ā¢ 50% of SC roads not eligible for
Federal funding
13. www.CharlestonCommercialMarketForecast.com
ā¢ Recession on horizon? Indicators say yes
ā¢ Feds will raise rates in 2015 ā or will they?
ā¢ Rising dollar makes exports less competitive
ā¢ Industrial sector continues steady improvement
ā¢ Continued āreshoringā trend ā FDI
ā¢ We will see impact from growth of E-Commerce/Omni-Channel āShip-from-Storeā trend
ā¢ Locally, automotive will be dominant market driver. Temper expectations on suppliers
ā¢ Tech sector growth due to clustering and quality of life for entrepreneurs
ā¢ More Jobs + More People = Increased interest from āoutsideā investors/developers seeking
yield (increased appetite for risk)
ā¢ Panama Canal expansion and Port investments bode well for our region
ā¢ Inland port continues to exceed expectations
ā¢ Increased development activity in the I-26 Jedburg/Ridgeville sub-markets
ā¢ Additional spec product to come online in 2016
ā¢ Congestion issues could cause a mini-migration from certain sub-markets
ā¢ Continued rent growth
ā¢ Tri-County region becomes SCās dominant market in terms of deal flow
PREDICTIONS