Industrial
Summary:
In the first quarter of 2016, construction activity in the industrial sector continued to dominate the market. Colliers reports that more than 1.1 million square feet of space was delivered to the market in the first quarter, and half of that space was occupied upon delivery. Cushman & Wakefield | Thalhimer says the Greenville market “continues to be a draw to national investors and that construction costs are up and increasing due to demand.”
But for the first time since the second quarter of 2015, the industrial market saw a decrease in asking rates, says NAI Earle Furman in its report. Average asking rental rates dropped from $3.62/SF in Q4 of 2015 to $3.57/SF in Q1 2016. Colliers says the flat vacancy rate is “misleading as it does not accurately depict robust interest and activity in the market.”
Outlook:
All reports speculated that 2016 will continue to see strong demand with additional build-to-suit and speculative construction activity. CBRE notes that Spartanburg-based Johnson Development, who successfully timed the construction and disposition of speculative development during the last real estate cycle, has started construction on its own speculative project, a 360,000-square-foot distribution facility in Spartanburg.
Cushman & Wakefield | Thalhimer points out an additional challenge for the Upstate includes labor force and employment: “There is a strong need for a larger employer base likely driving new residents to locate to the Upstate.” Also, keep an eye on Oconee County as it is gaining attention and successfully recruiting business, says Colliers. Across the Upstate, sites are becoming scarce as developable sites with infrastructure in place are built out.
Office
Summary:
The office market also continued to be strong during the first quarter of 2016. CBRE reports that vacancy is now at a record low of 11.7 percent. Six buildings totaling 119,500 square feet were completed in the Greenville/Spartanburg market with another 294,800 square feet under construction, including the Erwin Penland Building at 125,000 square feet and Falls Park Place at 72,000 square feet, reports CBC Caine.
All companies report seeing a growing trend of shared workspace emerging in the market. The use of co-working space is becoming increasingly popular among corporate users, said CBRE, with over 210,000 square feet of office space in the market that could be classified as co-work space.
Outlook:
Expect to see a number of CBD and suburban office buildings and parks change hands in 2016, says Cushman & Wakefield | Thalhimer.
CBRE notes that as construction continues through 2017 on the interchange between I-85, I-385 and Woodruff Road, suburban landlords may have a challenge in finding tenants.
Retail
Summary:
The retail sector also remains strong in the Upstate. Downtown Greenville is the focal point of the market for many retailers, although the suburban markets are also seeing significant activity, reports Colliers. Retailers want to be at prime intersections with high visibility and traffic counts. As a result, vacancy rates in these corridors are very low and quality space is difficult to find. The Woodruff Road corridor has one of the highest suburban asking rental rates averaging $34.02 NNN PSF, said the Colliers report.
Vacancy rates continued to decline from 6 percent in Q4 2015 to 5.8 percent in Q1 2016, reports NAI Earle Furman. Asking rental rates saw a slight decline from $10.12 PSF in Q4 2015 to $9.99 PSF in Q1 2016.
Outlook:
Similar to the office market, look for an increase in investment sales throughout 2016. Rental rates are expected to continue to increase as high demand and escalating construction costs continue. The grocery sector and fast casual restaurants will continue to see growth, says NAI Earle Furman.
