The industrial warehouse locomotive is back on track in Upstate South Carolina. We experienced tremendous positive absorption in warehouse space in 2011 — around 1.7 million square feet — and vacancy is down to pre-recession levels at 9 percent. Vacancy has been dropping steadily from 10.8 percent since the fourth quarter of 2009, and experienced a dramatic drop in 2011.
This recovery is a result of the recent surge of announcements of new and expanding operations by manufacturing companies in the Greenville/Spartanburg area. Corporations such as Michelin, Bosch Rexroth Corp., Scio Diamond Technology, Honeywell International, PRETTL Electronics, Griffin Thermal Products and BMW will invest more than $277 million combined in our area and create 3,714 new jobs.
There are 4,014 industrial properties currently in the Greenville/Spartanburg market. Sixteen leases and four sales for industrial warehouses were reported in the first few weeks of 2012. Rental rates for warehouses range from 32 cents per square foot to $13.12 per square foot, a wide range that depends on size, location and condition. Overall, the average rental rate is $2.92 per square foot.
With vacancy dropping continually and no new developments underway or on the horizon, inventory is being depleted, which is creating a great demand for new industrial development. We currently have no spec buildings on the market, although having spec inventory on hand would help our area continue to attract business here. This poses a challenge, as it is very difficult for developers to obtain capital with the new tighter lending regulations and requirements. Banks, investors and developers alike realize the rebound is well underway, but are in “proceed with caution” mode.
Owners and investors were shaken by the recession and have been afraid to take on the additional space they need or take any risk with real estate purchases. However, during the past 6 months they are feeling more confident in the market and are beginning to make decisions about expanding or relocating, as prices are low and the demand for space is increasing the value of their investments.
Some of the hotspots in the market are the areas around Interstate 85, such as the Donaldson area, ICAR, I-385/Woodruff Road and Spartanburg, where Amazon recently announced it would build a $50 million, 1 million-square-foot fulfillment facility. These areas have good industrial inventory, low vacancy, positive absorption and attractive rental rates. The average rate in Spartanburg is around $2.50 per square foot and just over $3.00 per square foot off Interstate 85 in Greenville.
In addition, Pelham Road, I-85 and Highway 101 have seen a lot of activity recently with BMW’s expansion and the ideal positioning at a major interstate between Greenville and Spartanburg. This submarket has approximately 468 properties with 10 percent vacancy and an average rental rate of $3.43 per square foot. We expect this submarket to continue attracting businesses, including BMW suppliers, and developers as there is an abundance of available land that is well positioned for development.
As we enter the second quarter of 2012, we hope that the unveiling confidence in the market will continue and that developers will be inclined to start new projects that will add valuable inventory to our industrial market and continue pulling full steam ahead in bringing manufacturing business here.
— Randall Bentley, SIOR, CCIM, is president of
Lee & Associates’ Greenville office.