2019 may be the last full year in which Upstate business leaders are bullish. They intend to waste no time making hay while the sun shines.
Coming off strong market fundamentals in 2018 fueled in part by low interest rates and tax reform, South Carolina and the Upstate will experience growing job creation, steady wages, and continued interest in the region as a place to do business, according to forecasts delivered in December at two economic-outlook conferences.
In July, the U.S. will have set a record for the longest uninterrupted economic expansion in its history, shattering the 10-year record set in 2001, said Tim Quinlan, senior economist with Wells Fargo Securities, who was the keynote speaker at the Dec. 7 outlook conference sponsored by the Spartanburg Area Chamber of Commerce.
“There have never been more jobs in the U.S. economy than there are today,” the Charlotte, North Carolina-based economist told the gathering, one reason why Quinlan is predicting a new record for sales this holiday season.
In 2018, average hourly earnings for private-sector employees picked up in most parts of the state, with the second-largest gain occurring in Spartanburg (10.5 percent) and a moderate gain of 3.1 percent in Greenville, according to economists Douglas Woodward and Joseph Von Nessen of the University of South Carolina’s Darla Moore School of Business, who spoke at an event in Columbia on Dec. 4.
For 2019, Woodward and Von Nessen are forecasting a drop in the state’s unemployment rate to 3.1 percent and a 1.8 percent increase in job creation.
While more rate hikes are expected — “three or four” remain in the current economic cycle, Wells Fargo’s Quinlan said, with no more than two next year — the economist appeared more concerned about the longer-term effects of tax cuts.
“Now we’re moving back into big deficit territory,” he said. “This is my top worry right now.”
Looking at the next 12 months, many of the Upstate leaders who attended the chamber’s conference in Spartanburg were upbeat, citing strong vital signs in Spartanburg County and other parts of the region.
During breakout sessions devoted to economic development and real estate, participating experts were ebullient about industrial and commercial development.
“I would say the outlook is extremely positive,” said Carter Smith, executive vice president of the Economic Futures Group of the chamber.
“The speculative development market, in terms of building, is at a level that we’ve never experienced,” Smith said, with some developers routinely talking about 400,000- or 500,000-square-foot facilities while many 250,000-square-foot buildings are up or underway. The capabilities of the Inland Port, he added, are helping to entice more projects in distribution, logistics, and e-commerce.
John Montgomery, vice president at the Spartanburg office of Colliers International, added that almost all of the developers involved in the 6.5 million square feet of speculative building now in the pipeline hail from other markets. “I’m very bullish,” Montgomery said of the next two years.
A new federal regulation will help propel such development, another speaker noted.
Electronic logging devices now tied to the engines of motor carriers are forcing drivers to pull off the road after 11 hours and stand down for 10, an occurrence that is spurring demand for strategically placed warehouse and distribution facilities along I-85, said Bobby Lyons, founder of Lyons Industrial Properties.
Lyons added that his firm has just experienced the best year in its 22-year history.
“I’m bullish on the market, even with some interest rate hikes over the next 12 months,” he said.
As more businesses are attracted to the Upstate, there is a growing need to address the supply of housing in the region, panelists agreed.
Although rates will be somewhat volatile going forward, the 4.625 percent rate on a 30-year fixed mortgage at the start of December was the lowest in two months, said Angela Halstead, a vice president at Coldwell Banker Caine. From a historical perspective, “interest rates are going to be very reasonable for the foreseeable future,” she said.
A majority of residential construction is occurring at $350,000 and below, Halstead pointed out, and there is “a good deal of resurgence” in custom homebuilding. “Most of what is pent-up is at that higher price point,” but inventory is loosening up and the market is becoming more balanced, she believes.
Woodruff and Boiling Springs represent hot spots of continued residential growth, said broker Stuart Smith of NAI Earle Furman, and that growth continues to attract new retail, he said.
In addition to an adequate supply of housing, public-private partnerships will continue to place a heavy emphasis on providing employers with a qualified workforce in 2019.
“We have a ‘jobs looking for people’ problem in Spartanburg,” said Allen Smith, president and CEO of the area chamber.
Beyond STEM courses and training and internships in specialized manufacturing skills, the city of Spartanburg has just launched “Emerge,” a minority business accelerator that helps black residents develop their own business while also helping enterprises relocate to a predominantly black neighborhood. Fourteen businesses are now participating in the initiative as it heads into its first full year, said Patty Bock, the city’s economic development director.
While an economic slipstream may propel the Upstate through much of 2019, one unknown that could impact the region is tariffs.
With a 90-day period in place for further discussions between the U.S. and China on trade, markets are hoping that the Trump administration will drop plans for an escalation of tariffs that target the auto industry.
David Britt, chairman of the economic development committee of the Spartanburg County Council, told the conference that “only 35 percent” of the 211 international companies doing business in the county have ties to the industry.
“We have diversified,” said Britt, while acknowledging the risk for supply chains posed by tariffs.
Quinlan of Wells Fargo is somewhat hopeful. With the Chinese economy slowing, party leaders in Beijing may not want to risk an additional tit-for-tat on tariffs, he suggested.
“They have more to lose,” he said.