Favorable trends create solid footing for Greenville CRE market
By Mark Ratchford
The fundamentals continue to remain positive in all sectors of commercial real estate for the Upstate of SC. CRE tracks with residential real estate when market trends are up or down, and the strong growth in residential means we are seeing growth in the commercial sectors of office, retail, and industrial.
The Upstate added nearly 20,000 new residents between July 2017 to July 2018, which is approximately 55 more people moving to the Upstate every day to enjoy our vibrant, family-friendly community bursting with opportunity and a great quality of life.
Today, 505 companies from 38 different countries call the Upstate home, which has been fueled by South Carolina’s pro-business environment offering companies a 5% corporate income tax rate in a right-to-work state.
The following are some highlights of commercial real estate activity in the Upstate with statistical data sourced by CoStar.
The office market fundamentals remain strong with moderate rent growth and vacancy at 7.9%. Strong absorption in the first two quarters occurred in conjunction with a slight decrease in asking rates. The office market is shifting somewhat following national trends, making the workplace more amenitized to attract and retain employees from a tight labor pool. The cowork office concept continues to gain traction in Greenville with a recent 15,000-square-foot lease by a national tenant downtown. Newer downtown office spaces are offering amenity richness and tapping into the connectivity and walkability of Greenville’s downtown district.
Notwithstanding the obvious shift in the retail sector affected by e-commerce, the fundamentals of the retail sector remain solid. Vacancies are at historic lows of 3.9% although rent growth has remained flat. The majority of new retail space has been in the form of mixed-use projects or smaller neighborhood retail centers.
The Greenville-Spartanburg market was named one of the top 10 emerging U.S. industrial markets to watch for 2019, and it’s not surprising due to the Upstate’s geographic location with access to major interstate highways and roads located halfway between Atlanta and Charlotte. With over 200 million square feet of space, the Upstate industrial sector has a vacancy rate of just 4.4%, which includes a 12-month rent growth rate of 5.1%. Despite record new construction and absorption, the industrial sector continues to expand primarily driven by e-commerce. Additionally, the manufacturing sector continues to expand with 65 different manufacturers announcing expansions in the Upstate just last year. The expansion of the Inland Port in Greer continues to set container records supporting both manufacturers and distributors.
The influx of new residents continues to drive the multifamily market. Despite all of the new construction, demand outpaced new deliveries by more than double in 2018. The vacancy rate remains low at 6.8%, which includes a 3.3% trailing asking rent growth, with over 1,175 units absorbed during the same period. The undersupply of affordable single-family housing has contributed to the absorption of multifamily units, which is expected to continue.
The Upstate is securely on the map for investors from around the country. According to the Upstate SC Alliance, in 2017, the Upstate accounted for approximately 38% of the state’s new capital investment and 34% of the state’s new job announcements. The Upstate is classified as a tertiary market, which is a trade area of less than $2 million. Investors rounding out a portfolio investment from larger primary markets such as Atlanta and Charlotte are looking at the Upstate as a solid tertiary market.
Commercial real estate in Greenville continues to be a seller’s market and the lack of available properties has driven prices up. The old adage “if you build it, they will come” still holds true today.
However, CRE is cyclical, and although all factors remain positive, each deal must be evaluated based on sound market principles and a deep understanding of the Upstate market. All sources point to continued growth for the Upstate, which continues to put stress on our infrastructure and labor pool, something many in the Upstate are addressing with many localized initiatives.
Mark Ratchford is a principal and broker at KDS Commercial Properties. He utilizes 25-plus years of experience in the appraisal field by providing in-depth analysis and solutions to complex commercial transactions for his clients.