Columbia’s Turbocharged Manufacturing Renaissance is Alive and Well in 2019

by Alex Tostado

There is a lot of buzz about the dominance of e-commerce and its effects on the industrial market. Columbia has its fair share of retailers with e-commerce distribution facilities as Amazon, The Home Depot and Target all have major distribution centers in the Midlands region of South Carolina. However, retail distribution is not the main driver of this industrial market. The heart and soul of the central South Carolina industrial market is manufacturing.

Manufacturing properties make up approximately 35 percent of the 70 million square feet of industrial product in the Columbia metropolitan statistical area. While the balance of space is classified as warehouse/distribution, a large portion of that is used to service manufacturers, pushing the total amount of manufacturing-related space well above 50 percent. Since 2013, the pace of South Carolina’s manufacturing job growth has been four times faster than the national growth rate.

This manufacturing renaissance has created demand for Class B multipurpose buildings that have manufacturing infrastructure, such as heavy electric services, cranes, HVAC and support facilities including locker rooms, restrooms, cafeteria and parking to handle larger employee requirements.

Charles Salley
SIOR, Vice President and Director of Industrial Brokerage,
Colliers International

In the 1970s and 1980s, industrial buildings constructed in central South Carolina were part manufacturing facility and part warehouse. Many of these properties have been purchased by value-add investors that have modernized the properties with new roofs, LED lighting, ADA-compliant restrooms and dock equipment. One of the leading value-add investors for industrial real estate in South Carolina is Reger Holdings, which has purchased and made improvements to 42 buildings totaling 5.5 million square feet since 2008. Reger currently leases these properties to 53 tenants, mainly manufacturers and companies supporting manufacturing.

Historically, manufacturers have owned rather than leased their real estate, but this trend is changing as technology advances. Manufacturers are investing in new equipment rather than real property purchases and are taking advantage of a move-in ready building with the appropriate infrastructure at a fraction of the cost and time that it would take to construct a new facility.

The overall vacancy rate for industrial product in the Columbia MSA dropped below 7 percent in the first quarter of 2019, and demand for space has remained constant and brisk. New construction will be required to serve this demand and an increase of both build-to-suit and speculative construction can be predicted for the rest of 2019.

Magnus Development Partners is ahead of this predicted new construction trend, currently building its second speculative development in the Lexington County Industrial Park, Midway Logistics IV. Its recently completed Midway Logistics III building had leases signed before construction was completed, and Magnus doesn’t plan to stop with speculative developments so long as this demand continues.

The Lexington County submarket, located at the intersection of Interstates 77 and 26, is a hot spot in the region, garnering 4 million square feet of new construction in the past decade, including the four Midway Logistics speculative buildings in Lexington County Industrial Park and new buildings for Amazon, Nephron Pharmaceuticals Corp., Republic National Distributing Co., The Home Depot and Domino’s. A business-friendly climate, competitive property tax rate, proximity to a UPS Air and Ground Hub, nearby interstates and access to the Port of Charleston have made this submarket fertile ground for new industry.

— By Charles Salley, SIOR, Vice President and Director of Industrial Brokerage at Colliers International. This article originally appeared in the May issue of Southeast Real Estate Business.

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