Market analysis derived from fourth-quarter 2017 CRE market reports provided by Avison Young, CBRE, Colliers, CBC Caine, Cushman & Wakefield | Thalhimer, and NAI Earle Furman
By Sherry Jackson, contributor
The Office market saw some turnover in 2017, and the Upstate is feeling those effects. CBRE says, “The Greenville-Spartanburg market has now experienced four consecutive quarters of underwhelming rates of absorption, or office market growth.” There are large blocks of both sublease and directly vacant office space available within all sectors of the market, reports Colliers — a big difference from early last year when vacancy was at an all-time low.
There’s still new office construction on the horizon even with the vacancies. The largest project underway in the fourth quarter of 2017 was the 60,000-square-foot Jervey Eye Group, which is 50 percent pre-leased, reports NAI Earle Furman. Other projects, such as the site of the former Greenville Memorial Auditorium, Camperdown, and the BB&T building, are expected to add even more office space in downtown Greenville. CBC Caine is reporting 116,273 square feet of project remain under construction.
The good news is that existing tenants will have more negotiation power when renewing leases, especially in the Greenville CBD as more office space is added or freed up. According to Cushman & Wakefield | Thalhimer, look for even more suburban availability as engineering firms continue to consolidate and move.
The Industrial market continues to be strong with a positive annual absorption of 3,613,218 square feet in 2017, says Colliers. The Port of Charleston continues to have record-setting shipments, and that directly impacts the Inland Port in Greer, which also reported a 20.4 percent increase in shipments in 2017 from the previous year. Cushman & Wakefield | Thalhimer reports a positive absorption of 400,000 square feet in the fourth quarter of 2017.
NAI Earle Furman reports a steady $3.67 square foot average rental rate. Cushman & Wakefield | Thalhimer is forecasting several lease transactions to occur in early 2018 that will take a “significant” amount of industrial space off the market.
Production at the new Volvo and Sprinter Van facilities in Charleston are expected in 2018 and will impact the Upstate market, says Colliers. Expect to see more available space with 5.34 million square feet of industrial buildings added to the inventory. Newly released tax reform will impact industrial real estate, says Avison Young, with accelerated depreciation and treatment of pass-through entities that will spur further industrial investment and adaptive reuse.
In Retail, vacancy rates in the Upstate have decreased and average rental prices saw a slight decrease, reports Avison Young. NAI Earle Furman reported a 4.4 percent vacancy rate for the fourth quarter of 2017, the lowest in 12 years. Tenants are beginning to choose non-downtown locations to take advantage of lower rental rates, reports Cushman & Wakefield | Thalhimer. With rental rates of $20-$30 per square foot in downtown locations, that’s lower than the national average, but high for the Upstate retail market.
Top Golf announced plans to build their first location in the Upstate. If/when that occurs, that will spur additional retail opportunities in the I-85/Pelham Road corridor. Downtown Spartanburg will continue to ramp up its retail offerings as it continues its hot streak. If/when the former Greenville Memorial Auditorium site gets a new mixed-use development, it will bring additional retail opportunities to downtown Greenville.