Tight Industrial Market to Benefit from Growing Automotive Cluster

Research &
Forecast Report
SOUTH CAROLINA | INDUSTRIAL
Q2 2015
Tight Industrial Market to Benefit from
Growing Automotive Cluster
Jessica Rahal Research Coordinator | South Carolina
Key Takeaways
>> South Carolina’s industrial market continues to tighten with
declining vacancy, increasing rental rates and growing demand
for space.
>> Major investments from automotive manufacturers Volvo and
Mercedes-Benz were announced during the first half of 2015.
Together, the manufacturers will be investing $1 billion and
creating 5,300 jobs over the next decade in the Charleston
region.
Market Indicators
Relative to prior period
Q2 2015
Q3 2015*
VACANCY
NET ABSORPTION
CONSTRUCTION
RENTAL RATE
Note: Construction is the change in Under Construction.
*Projected
>> Speculative construction is gaining momentum as tenants seek
move-in ready space.
>> Industrial employment is on the rise in South Carolina, nearing
pre-recession levels but remains below the peak employment
seen in the 1990s.
>> Strong activity is setting records for South Carolina’s ports.
Major Announcements Grow South
Carolina’s Automotive Cluster
South Carolina’s existing automotive cluster, which includes
more than 250 automotive-related companies, will soon grow.
Significant announcements were made by major automotive
manufacturers Volvo Cars and Mercedes-Benz Vans during the
first half of 2015. The manufacturers plan to invest a combined $1
billion and create 5,300 jobs over the next decade in the Charleston
region.
Mercedes-Benz Vans, a division of Daimler, announced plans earlier
this year to invest $500 million in a new Sprinter van plant in
Charleston and create 1,300 new jobs over the next several years.
Construction on the new plant is expected to begin in 2016. The
manufacturer is expanding its facility at 8501 Palmetto Commerce
Parkway and will use the new plant to manufacture next-generation
Sprinter vans to supply the North American market.
South Carolina Industrial Inventory
I-77 Corridor
30.3 million SF
Midlands
77.0 million SF
South Carolina
325.8 million SF
Lowcountry
33.4 million SF
Upstate
185.2 million SF
Source: Colliers International Research, CoStar
Just two months after Mercedes-Benz Vans made their
announcement, Volvo selected South Carolina for its first American
manufacturing plant. The $500 million facility will be located in
Berkeley County and is expected to create 2,000 new direct jobs
over the next decade and up to 4,000 jobs by 2030. The facility
will serve to manufacture the latest generation Volvo models for
sale in the U.S. and other markets. Volvo expects to complete the
first vehicle at the plant in 2018.
in the market. A stronger U.S. economy, growth in domestic
consumer spending and efficient logistics are factors driving
domestic manufacturing growth.
The manufacturers will join BMW in South Carolina, which
established its Spartanburg County manufacturing plant in 1994.
BMW initially announced plans to invest $600 million and create
2,000 jobs in the Upstate. Today, following much success, the
manufacturer has invested almost $7 billion and employs 8,000
people.
>> Techtronic Industries (TTI) is expanding its footprint in the
Upstate with a new 1.3 million square-foot light assembly and
distribution facility at the intersection of I-85 and Highway 81
in Anderson County. The company’s $85 million investment is
expected to create more than 200 new jobs. Construction is
underway and expected to complete by mid-year 2016.
The presence of such major automotive manufacturers has the
potential to grow the presence of automotive-related companies
throughout South Carolina. In an effort to cut transportation costs,
which make up a large portion of production costs, more suppliers
are choosing to locate in close proximity to their customers, a
trend known as localization. As a result, automotive suppliers and
third-party logistics providers are expected to flock to the region
in an effort to better serve their customers. Additionally, existing
suppliers will likely see a surge in demand, which will generate a
need for additional labor and space, benefitting the state’s industrial
market.
Volvo Cars considered over 60 U.S. locations before selecting the
Berkeley County site. Various factors essential for growth and
success give South Carolina an edge in attracting automotive and
non-automotive manufacturers. The Port of Charleston’s strength
and experience with automotive exports, the presence of other
global automotive manufacturers, a skilled labor force and probusiness environment helped attract Volvo to South Carolina.
Tightening Market Conditions
South Carolina’s industrial market consists of almost 326 million
square feet of industrial space across 4,380 buildings. The market
can be thought of as four major industrial regions, the Upstate,
Midlands, Lowcountry and I-77 corridor in the northern part of the
state.
Robust demand for industrial space in recent quarters is driving
down vacancy rates in markets throughout South Carolina. The
resulting statewide industrial vacancy rate was down to 8.5% at
mid-year 2015 from 8.8% the previous quarter and 9.3% one year
ago. Leasing velocity was solid as evidenced by a net absorption
of approximately 1.7 million square feet during the second quarter
of 2015. Activity was widespread as all major industrial regions
experienced positive absorption and lower vacancy rates. The
Midlands region absorbed the greatest amount of space.
While the state is receiving growing interest from automotive and
aviation suppliers, other user-types including third-party logistics
providers and light assembly operations are also looking for space
2
Investments & Expansions
Announcements of new investments and expansions continued to
fill headlines throughout the second quarter of 2015.
>> Dollar Tree recently confirmed plans to open a $104.4 million
distribution center in Cherokee County. The 1.5 million squarefoot facility will be located at Upstate Corporate Park along I-85.
The company expects to be operational in 2016 and create 400
jobs over 5 years.
>> Borgwarner Inc. is expanding in Seneca, opening a second
facility in Oconee County. The company is leasing approximately
100,000 square feet at Seneca Commerce Park in a 423,000
square-foot, multi-tenant industrial building. The $13.3 million
expansion is expected to create 50 new jobs by 2020.
>> Gerber Childrenswear is investing $33 million and establishing
a new distribution center in Berkeley County. The 477,000
square-foot facility is under construction at Foreign Trade Zone,
a joint-venture of The Rockefeller Group and WestRock Land
Development.
>> GKN Aerospace plans to expand its existing operations in
Orangeburg County. The aerospace supplier plans to invest $20
million and occupy a new 126,000 square-foot facility adjacent
to its existing facility at 348 Millennium Drive. GKN expects to
begin operations at the facility late in 2016 and create more than
75 jobs.
Industrial Vacancy Rates by Region
14.5%
11.2% 11.4%
9.8% 9.5%
8.9%
9.8%
8.2% 8.2% 8.2%
7.9%
6.8%
Midlands
Lowcountry
Q2 2014
Upstate
Q1 2015
Q2 2015
Source: Colliers International Research, CoStar
South Carolina Research & Forecast Report | Q2 2015 | South Carolina Industrial | Colliers International
I-77 Corridor
1
6
5
4 3
1
2
§
¦
¨
§
¦
¨
185
13
85
5
6
2
Highlighted South Carolina
Speculative Industrial Developments
§
¦
¨
§
¦
¨
385
77
§
¦
¨
7
20
3
Speculative Construction Gains
Momentum
9
8
§
¦
¨
26
§
¦
¨
95
Despite growing demand for industrial space throughout
South Carolina, the existing inventory has remained stagnant
with limited construction in recent years. New speculative
construction is finally gaining momentum as more companies
aim to shorten their time to market and are looking for move-in
ready space.
10
12
11
4
§
¦
¨
526
Approximately 1.1 million square feet of new, Class A space has
been added to the existing inventory over the past year. Over
2.6 million square feet of high quality speculative space remain
under construction throughout South Carolina..
The new space is leasing successfully given the limited options
for quality space throughout the market. Although rental rates
for new construction are typically higher than average rental
rates, the increasing rates for existing space make speculative
space a feasible option for many.
Kenco Logistics Services, a third-party logistics provider,
recently moved into a new 160,000 square-foot speculative
building developed by Pattillo Industrial Real Estate at Hillside
Industrial Park. Additionally, speculative buildings at Caliber
Ridge Industrial Park saw great activity with Bosch Security
Systems and Pilot Freight leasing space.
Developers are also finding that it is important to have padready sites available for construction in an effort to reduce
construction time. Buildings constructed on pad-ready sites
on average take 5 months less to complete than those on sites
which need to be prepped for construction due to entitlements
and permits, among other items.
Recently Completed
1
3
White Horse Industrial Center
Greenville County | Burnham Partners LLC & Exeter Property
Group | 306,000 SF
2
Hillside Industrial Park
3
1510 Key Road
4
Building 4 at Crosspoint
5
Waterford Business Park
6
River Walk Business Park
Spartanburg County | Pattillo Industrial Real Estate | 161,000 SF
Richland County | Boyd Properties | 38,500 SF
Charleston County | Jamestown & Childress Klein | 275,000 SF
York County | City of Rock Hill | 30,000 SF
York County | Beacon Partners | 275,000 SF
Recently Completed
Under Construction
Under Construction
1
Logue Park
2
Southchase One
3
Greenville County | Cothran Properties | 110,000 SF
Greenville County | Pattillo Industrial Real Estate | 205,000 SF
Hillside Enterprise Park
Spartanburg County | Scannell Properties & Strategic Capital
Partners | 155,000 SF
Caliber Ridge Industrial Park
4
5
Spartanburg County | Liberty Property Trust
140 Caliber Ridge Dr: 156,000 SF
120 Caliber Ridge Dr: 156,000 SF
Flatwood Industrial Park
Spartanburg County | Johnson Development Associates
363,000 SF
6
Wingo Park
7
Mid Carolina Commerce Park
8
Shop Grove Industrial Park
9
Saxe Gotha Industrial Park
10
North Pointe Building C
11
Charleston Regional Business Center
12
Palmetto Commerce Park
13
Carolina Place
Spartanburg County | Becknell Industrial | 175,000 SF
Newberry County | Newberry County | 50,000 SF
Richland County | Boyd Properties | 60,200 SF & 70,200 SF
Lexington County | Lexington County | 120,000 SF
Berkeley County | MWV & SunCap Property Group | 350,856 SF
Berkeley County | Childress Klein & Amstar | 278,720 SF
Charleston County | Pattillo Industrial Real Estate | 142,000 SF
York County | Beacon Partners | 277,000 SF
South Carolina Research & Forecast Report | Q2 2015 | South Carolina Industrial | Colliers International
Q2 2015 Industrial Market Summary Statistics
South Carolina
COUNTY
INVENTORY
(SF)
BUILDINGS
DIRECT VACANT
(SF)
SUBLEASE VACANT
(SF)
TOTAL VACANT
(SF)
TOTAL VACANCY
RATE (%)
Q2 2015
ABSORPTION (SF)
LOWCOUNTRY COUNTIES
Berkeley County
106
13,433,533
1,039,688
81,180
1,120,868
8.3%
319,458
Charleston County
201
15,729,391
624,375
0
624,375
4.0%
56,221
Dorchester County
51
4,200,036
530,989
0
530,989
12.6%
-9,500
Lowcountry Total
358
33,362,960
2,195,052
81,180
2,276,232
6.8%
366,179
MIDLANDS COUNTIES
Aiken County
57
10,653,043
721,128
0
721,128
6.8%
20,600
Calhoun County
7
448,137
157,987
0
157,987
35.3%
0
Clarendon County
8
670,926
215,600
0
215,600
32.1%
0
Darlington County
21
3,565,559
197,500
57,120
254,620
7.1%
0
Fairfield County
13
1,545,322
173,220
0
173,220
11.2%
0
Florence County
105
7,845,947
1,034,376
0
1,034,376
13.2%
-11,434
Kershaw County
34
5,253,396
357,647
0
357,647
6.8%
0
8
823,363
117,260
0
117,260
14.2%
0
Lexington County
137
11,894,257
341,444
0
341,444
2.9%
281,849
Newberry County
12
1,889,358
222,250
0
222,250
11.8%
-15,000
Orangeburg County
69
6,922,449
264,969
86,298
351,267
5.1%
-69,840
442
19,832,787
1,727,114
238,000
1,965,114
9.9%
304,103
5
551,181
310,929
0
310,929
56.4%
0
Lee County
Richland County
Saluda County
Sumter County
52
5,095,955
663,983
0
663,983
13.0%
104,600
Midlands Total
970
76,991,680
6,505,407
381,418
6,886,825
8.9%
614,878
Anderson County
288
18,829,822
1,009,732
0
1,009,732
5.4%
23,260
Cherokee County
63
5,874,773
1,325,786
0
1,325,786
22.6%
7,000
Greenville County
UPSTATE COUNTIES
1,326
72,666,193
6,018,588
0
6,018,588
8.3%
724,613
Laurens County
76
10,913,516
847,321
0
847,321
7.8%
900
Pickens County
84
5,302,486
376,346
0
376,346
7.1%
0
Spartanburg County
923
71,631,221
5,537,640
0
5,537,640
7.7%
-197,999
2,760
185,218,011
15,115,413
0
15,115,413
8.2%
557,774
Chester County
37
5,831,682
1,256,649
236,210
1,492,859
25.6%
10,000
Lancaster County
48
4,919,761
1,163,999
0
1,163,999
23.7%
0
Upstate Total
I-77 CORRIDOR
York County
207
19,509,538
783,687
0
783,687
4.0%
185,213
I-77 Corridor Total
292
30,260,981
3,204,335
236,210
3,440,545
11.4%
195,213
MARKET TOTALS
4,380
325,833,632
27,020,207
698,808
27,719,015
8.5%
1,734,044
Source: Colliers International Research, CoStar
Port of Charleston
4
Inland Port Terminal
South Carolina Research & Forecast Report | Q2 2015 | South Carolina Industrial | Colliers International
South Carolina Ports
Market Outlook
Activity is strong at both of South Carolina’s ports, the Port of
Charleston and the South Carolina Inland Port in Greer, and is
expected to increase with the additional production of automobiles.
The ports’ many users benefit from efficient logistics and reduced
transportation costs.
South Carolina’s industrial market is poised for continued success
through the remainder of 2015. Strong demand for industrial space
will continue as manufacturers and distributors look for ways to cut
transportation costs. E-commerce growth will generate a demand
for warehouse space while automotive manufacturing growth will
bring suppliers and manufacturers to the region. Despite slow
sales during the second quarter, sales activity is likely to pick
up as investors take advantage of the current low interest rate
before the speculated increase later this year. Rental rates will
increase as vacancy tightens and new space delivers to the market.
Momentum is likely to remain strong for speculative and build-tosuit construction.
The South Carolina Inland Port (SCIP) in Greer is exceeding
expectations. SCIP posted a new record in May 2015 with 5,845
rail lifts. The port’s users include BMW and Adidas. The inland
port offers direct rail service to the Port of Charleston via Norfolk
Southern.
+35.7%
Industrial Employment
5
Source: South Carolina Ports Authority
Annual Change in Industrial Employment
by Month | South Carolina
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
Source: Bureau of Labor Statistics, St. Louis Federal Reserve
South Carolina Research & Forecast Report | Q2 2015 | South Carolina Industrial | Colliers International
03/01/2015
05/01/2015
11/01/2014
01/01/2015
07/01/2014
09/01/2014
03/01/2014
05/01/2014
11/01/2013
01/01/2014
07/01/2013
09/01/2013
03/01/2013
05/01/2013
11/01/2012
05/01/2012
0
01/01/2012
Industrial employment is expected to bounce back in the near future
as a result of increasing labor costs abroad, rising transportation
costs and the strengthening U.S dollar. Additionally, technological
advancement is requiring a specific skill set, which is driving some
manufacturers to the United States. Locally, recent announcements
from Volvo and Mercedes-Benz will play a key role in growing
industrial employment.
1.9 million TEUs
handled
since June
2014
June 2015
03/01/2012
Although industrial employment is growing over recent years,
levels remain below pre-recession and 1990s employment. The
pre-recession peak was at 322,500 industrial jobs in June
2007. Prior to the recession, there was a dip in manufacturing
employment in South Carolina and throughout the United States as
manufactures chose to locate their plants abroad where labor and
production costs were less expensive than in the United States.
Manufacturing employment in South Carolina was its highest level
in 1990 when employment reached 403,700 jobs and made up
26.6% of total non-agricultural employment.
+14% over 2014
fiscal year
+13.9%
169,914 TEUs
Number of Industrial Jobs Added
Industrial employment, which includes manufacturing and
wholesale trade, is growing in South Carolina. As of June 2015,
approximately 302,500 individuals were employed in the industrial
sector, accounting for 15.1% of total non-agricultural employment.
Approximately 4,100 new jobs were added to the industrial
employment sector between June 2014 and June 2015.
2015 Fiscal Year
since June
2013
01/01/2013
South Carolina Inland Port
Port of Charleston
Twenty-Foot Equivalent Units (TEUs) | June
07/01/2012
Activity at the Port of Charleston is up over previous years
according to the South Carolina Ports Authority. The port handled
169,914 twenty-foot equivalent units (TEUs) in June 2015,
increasing 13.9% over June 2014. Approximately 1.9 million TEUs
were handled during the South Carolina Ports Authority’s 2015
fiscal year, 231,473 TEUs more than the 2014 fiscal year. Port
tonnage is greater than recent years and activity is expected to
further increase as new manufacturers and distributors continue to
establish South Carolina locations.
09/01/2012
Port of Charleston
502 offices in
67 countries on
6 continents
United States: 140
Canada: 31
Latin America: 24
Asia Pacific: 199
EMEA: 108
$2.3
billion in
annual revenue
1.7
billion square feet
under management
16,300
professionals
and staff
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FOR MORE INFORMATION:
Liz H. McCary
Director of Marketing | South Carolina
+1 803 401 4269
[email protected]
Jessica D. Rahal, CPRC
Research Coordinator | South Carolina
+1 803 401 4264
[email protected]
CHARLESTON INDUSTRIAL PROFESSIONALS:
Hagood Morrison, MBA, SIOR
Simons Johnson, CCIM, MCR, SIOR
John Beam
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Colliers International | Charleston
25 Calhoun Street, Suite 220
Charleston, South Carolina | USA
+1 843 723 1202
COLUMBIA INDUSTRIAL PROFESSIONALS:
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Columbia, South Carolina | USA
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GREENVILLE INDUSTRIAL PROFESSIONALS:
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Garrett Scott
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