by Brian Young, managing broker, Cushman & Wakefield | Thalhimer
During the past 15 months, we have tracked approximately 7,250,000 SF of speculative (“spec”) construction in Greenville/Spartanburg. This was an unprecedented/historic amount of available spec coming to the market at one time. Dating back to the end of Q3 2019, the market showcased about 207,000,000 SF of total industrial inventory, ranking it among the top 30 industrial markets (according to Cushman & Wakefield research) in the U.S. As of the end of Q4 2020, the market has over 227,000,000 SF of space. We have added over 20 million SF in a little over a year, including the above-mentioned spec space as well as previous spec buildings started in 2018 that delivered and build to suit product. Incredible!
As developers have delivered their product, there has been a keen eye placed on the market and amount of available spec space. Basically, if the space gets leased up, we will see another round in 2022 through 2023. If it doesn’t lease, many of the developers will leave and likely not return.
So what has happened, and what are we forecasting?
Since August 2020, the Upstate has seen about 3,400,000 SF of the spec space leased, about 50% of what was constructed. We also are aware of another 500,000 SF +/- that is currently under lease negotiations likely to be signed within Q1 2021. This leaves the market with just over 3,000,000 SF of available speculative space for the remainder of the year. Forecasting over the next six to nine months, and based on current user demand, we think much of the remaining spec space will be absorbed. Add to that the limited amount of second-generation space (previously constructed and occupied buildings) coming online and many companies looking to come to the market or expand within the market, pressure will be placed on remaining vacancies. We are forecasting a significant tightening of the vacancy rate, likely escalating rental rates and more spec development likely to come as we go into the end of 2021 and into 2022.
What’s driving all the growth? It’s a simple mix of some great market characteristics. Manufacturing, which drives skilled labor to the area, benefitting employment, is one driver. Connectivity within the region via highways and interstates along with close proximity to massive metros such as Atlanta, Georgia, and Charlotte, North Carolina, is another driver. The Inland Port and its offering of more efficient and less expensive transportation costs is a driver. Perhaps one of the most important drivers, though, is the fact that South Carolina is a right-to-work state, with a business-friendly climate and a spirit among its leaders to get things accomplished. The Upstate is poised for incredible success over the coming decade, thanks in part to this great mix of dynamic factors encouraging the growth of our community.