Upstate South Carolina’s Industrial Evolution Sets Up Market as National Power
Thirty years ago, there were 33 operating textile mills in Spartanburg County, South Carolina. Today, there are scarcely a handful.
The jobs and investments disappeared in the wake of regulatory change and international trade agreements. However, the infrastructure, location, existing workforce and entrepreneurial attitude of the area’s leadership saw this as a challenge to evolve.
And evolve it did — using the substrate of the textile industry as a solid foundation.
The well-trained and manufacturing-oriented workforce, coupled with the existing manufacturing support base (specialty machinery fabrication including maintenance and constituent chemical suppliers), were readily adaptable to new and recast job opportunities. This was the canvas on which the area’s evolution would be painted.
Specialty equipment, manufacturing, fabrication, chemical production and other vestiges of the textile industry have remained demand drivers for the Upstate market. They have been reconfigured in the form of investment and expansion by Milliken & Co., Toray Carbon Fiber, General Electric and Keurig Green Mountain.
The existing manufacturing-oriented workforce, with its previous experience and mindset, were a prime reason BMW selected Spartanburg County as the home for its first North America production facility. BMW’s Plant Spartanburg and its vast supplier and related support network have emerged as a primary market demand driver. The resulting wave of investments, job creation and economic prosperity have transformed the market into one that is barely recognizable from its former self.
As the fundamental demands of the manufacturing community evolved, so too did the desire for more efficiency in transporting goods to and from markets, particularly as imports/exports to international destinations. In an effort to address this need, the South Carolina Ports Authority authorized and subsequently constructed the Inland Port Greer facility. In the six years since opening, the inland port has vastly exceeded container volume projections and undergone multiple expansions with plans to more than double in size by 2020. The addition of the port, along with an extensive interstate and highway network, has facilitated an efficient goods transfer capacity that has garnered the attention of an entirely new ilk of user. Logistics-based operations including import centers, distribution/fulfillment centers and e-commerce-related tenants, are quickly moving in and contributing to an even larger industrial footprint in the region (some of the more well-known companies include Adidas, Dollar Tree, Dollar General and Amazon).
The Lay of the Land
Speculative buildings are being delivered and occupied at a healthy rate in the Upstate, and the numbers speak for themselves.
In 2018, approximately 1.5 million square feet of spec space alone was delivered to the market. All but 400,000 square feet of this was preleased before construction was completed, with the remaining space expected to absorb before the end of the month. The total market absorption across all building types (speculative, build-to-suit and second generation) has averaged in excess of 5.1 million square feet annually.
Since 2015, speculative buildings have consistently filled within three months of completion (but often much sooner) at rental terms and rates that meet or exceed pro-forma expectations. These statistics tell a compelling story of current market conditions.
Local, regional and national developers such as CRG, SunCap Property Group, Courtland Industries, Scannell Properties, Panattoni, Rooker, Becknell Industrial, TPA Group, Exeter Property Group and Liberty Property Trust are diligently working on speculative and build-to-suit industrial facilities and parks to keep up with demand.
With a diverse user base, the industrial boom in this region has become equally diverse. Developers are providing multiple building plan options and orientations to meet the differing needs created by each demand driver in the market. Rear-load, front-park buildings spanning 100,000 to 300,000 square feet, large cross-dock facilities measuring 250,000 to 500,000 square feet and buildings expandable to in excess of 1.3 million square feet are all currently under construction. Sustained activity and absorption are occurring across all of these building types.
As the market continues to absorb space at attractive terms, it has also evolved into a desirable investment target. Investors looking to take advantage of these dynamics are purchasing completed buildings at historic levels. Private investors, REITs and life insurance companies are all coming forward as buyers.
In short, the convergence of specialty material and automotive manufacturing, related supplier networks for these industries and rapid expansion of infrastructure and distribution systems have created a perfect storm for industrial development that is projected to flourish for many years to come.
As the inventory grows past 200 million square feet, Upstate South Carolina (particularly Spartanburg County) is garnering national and international attention. Those paying attention will reap the benefits as this market matures from emerging industrial darling to lead player in the national spotlight.
— By Garrett Scott, SIOR, vice president at Colliers International. This article originally appeared in the March issue of Southeast Real Estate Business.