(Photo by Amy Randall)

South Carolina’s real estate market has faced its share of ups and downs in recent years, but some experts say that the national trends don’t always conform to what they’re seeing in the Palmetto State.

Integrated Media Publishing hosted a roundtable discussion with four leaders in the commercial real estate industry on Feb. 8, 2024.

Here are excerpts from that conversation, edited for brevity and clarity.

The panelists were:

Darath Mackie, commercial real estate broker with Lee & Associates

Didi Caldwell, president and CEO of Global Location Strategies

Brian Rogers, market president for Home Trust Bank

Whit McGreevy, attorney with Womble Bond Dickinson

Integrated Media Publishing Editor David Dykes moderated the discussion.

 

Q. The Associated General Contractors of America and Sage Construction and Real Estate said in January that the construction firms expect a mixed bag for 2024. Challenges facing the industry are labor shortages, higher interest rates, input costs, and a still struggling supply chain. What's your assessment of the local market? And by local, I mean South Carolina. Or if you want to drill down even more locally, that would be great, too. Do you agree, disagree, or are you uncertain?

 

Didi Caldwell: Yes, yes, and yes. I agree, I disagree, and I'm uncertain. My crystal ball is broken. I was pretty sure that we were headed for at least a mild recession in 2023. That didn't happen. And I think that there's some broader macroeconomic and geopolitical issues … that are impacting the local market. But I will say that the United States, and South Carolina in particular, are very well positioned. And we focus a lot on industrial and capital-intensive projects and things like in the battery sector, metals, data centers. That sector is going very strong. I do think that there's some issues associated with some of the clean tech projects and more questionable technology. Because as interest rates and inflation make it harder and harder to meet hurdle rates, I think that's going to impact a lot of those projects. But for companies that have a strong balance sheet and a proven technology, I don't really see things slowing down anytime soon.

 

Darath Mackie: I would certainly have to agree with that. And I love that you asked about the local market. Because what I tell people a lot is that the local market is not the national market. And I don't think we talk about that enough and how really the Upstate is so very different. Lee & Associates, being an international firm, I talk with our brokerages from all over, and I hear very different stories. And they always tell me, Greenville's the unicorn. We know you've got the best vacancy. You're growing. So, we do have a strong commercial real estate market in the Upstate. Obviously, industrial, manufacturing, biotechnical, life sciences, those are our leaders. But we are seeing strong retail coming back. … I tell people all the time when they ask me, well, how really is the office market? I said, it's still strong. It could be a lot stronger. And I think that's an opportunity for us here to figure out how we can continue to do private-public partnerships, to continue to bring economic development here and bring corporate headquarters here and get office back on track.

 

Brian Rogers: I certainly agree with all of that. … Both in South Carolina as well as the Upstate, we're definitely an outlier to some of the national news that you hear, especially in tower office. Certainly (South Carolina) is a standout there. But specifically, we work in residential construction A&D, as well as vertical. … Certainly, the mortgage rates have come into play there in terms of homeowners, but the supply is still lacking. Our population growth in South Carolina is almost double the U.S. average ... and those people need a place to live. So, residentially, the construction is still strong, supply is having a hard time keeping up even with higher mortgage rates. (On) the commercial side … we have a very good climate, business climate across the state to promote growth. I think we're seeing that within the public and private sectors.

 

Q. Whit, are we facing more tailwinds than headwinds?

 

Whit McGreevy: I don’t think so. … I think South Carolina is still in a pretty good spot. I think it depends on the sector that you're talking about. I think, as Darath points out, office is a little bit of a challenge probably right now. But I'd echo Didi, the industrial side seems to be pretty strong still in the projects that we're seeing. And then I'd say that the one thing that I think is different from probably 2021, 2022 is we're not seeing as much speculative product development. So, when rates were low, there was available land, incentives were still being offered. You saw developers taking advantage of building some speculative projects, the big-box kind of projects that you see usually near the interstate, a lot of distribution-type facilities. I don't think we'll see that quite as much with the rate pressures. But I think what we're hearing from the South Carolina Department of Commerce is, we want more corporate headquarters type projects; we want more high-paying job type projects. … I don't see why South Carolina can't take advantage of that. I think we still have net positive migration, and so we have probably more workforce than some other areas. And I think the business climate is really good. So, I'm pretty optimistic.

 

Q. A lot of multifamily construction is underway. Is the supply one day going to be too much as younger people decide that they want to buy homes and start their families? Or do you think the in-migration will continue to take care of the supply?

 

 

McGreevy: I think in Charleston, I think if the real estate market stays the way that it is and prices continue to climb on single-family homes, I think you're absolutely going to see continued demand for multifamily. And there's just not enough in Charleston. We can't build our way out of it to a degree within sort of reasonable proximity to downtown. And so, I don't see multifamily struggling as more people move from multifamily, maybe into single-family because I don't think there's the supply of single-family to warrant it.

 

Caldwell: We’re starting to see the first of the baby boomers reach 80 years old. And baby boomers have, I think, 50 percent of all of the large homes in the country despite having only under 20 percent of the population. And these are houses with three or more bedrooms. And so, there's generations of people with families that have a shortage of houses because they're being held by folks that are empty nesters. But about age 80 is when people start to downsize. Either they pass away, or they move into assisted living, or they just decide that their home is too big to take care of. So, we're going to be seeing a big transition over the next decade or so as they move out of those homes. And if I know one thing about developers, (it) is that they will build and build and build until they overbuild. ... I think places like Charleston and Greenville probably are going to be able to absorb all of that extra space better than other places. But at some point, we'll be sitting around this same table and having the discussion about why did they overbuild multifamily.

 

Rogers: The stats I saw late last year said demand has recovered and is still strong, but that the supply is still lifting the vacancy rates a little bit. There's still a lot coming online right now, but the apartment construction starts have slowed a little bit year over year. So that could affect the supply down the road. And then just on the residential side, you're seeing a lot of single-family communities being built that are fully leased. We’ve got several here in Greenville. So, it’s an alternative to multifamily leasing.

 

Mackie: I would have to completely agree with everything we've heard. We face a housing shortage in the area. We cannot continue to do the amount of economic development and bring companies here and not be able to provide their employees homes. With the rates higher, the single-family home demand, it's a struggle, especially for first-time home buyers. ... So, multifamily is a very much needed commodity in our community, especially if we want to continue to have economic development growth. We have to be able to provide them homes, and we have to do that in an affordable way.

 

Caldwell: We tend to think of South Carolina as the major markets, the Charlotte area, Greenville-Spartanburg, Charleston, Columbia, the CSRA. But there's a lot of space in between. And with all the activity that we're seeing on the industrial side, it's a big advantage for them to be able to go to more rural or exurban areas because land is more plentiful and cheaper. There's less NIMBY (not in my backyard) attitudes there. They may have availability of rail, high-voltage electric infrastructure, gas, all of the things that they need to make them successful. I would say in those rural areas we have a really big opportunity, but there's a few things that hold them back. One is water and wastewater infrastructure, but the second one is housing. I mean, it's really hard to put a big plant that's going to employ several hundred, much less a thousand or more people if you don't have anywhere to house them. And my family comes from Greenville, and … we transitioned from being farmers to being textile workers. Both of my parents grew up on the mill hill, and they lived in company-provided housing. ... I think that we're going to have to start looking at public-private partnerships, working with developers, working with companies, working with government organizations to figure out how we can bring economic development to places outside of just those major markets.

 

Q. You raised coronavirus. And in 2020, when it began shutting down the economy, local and state officials expected development activity to grind to a halt, but it hasn’t. What lessons should the commercial real estate industry here in South Carolina have learned?

 

Rogers: I would just say my observation was, as opposed to grinding to a halt, I mean, I think the South Carolina population actually grew during that. People were not having to go into the office and were able to work from wherever they wanted. A lot of people chose to work remotely and move to coastal (or other) South Carolina communities. So, I think the opposite affected us. … I think we’re generally better off in South Carolina, particularly Greenville, Charleston, Columbia, than we are in most of the rest of the United States. I think we're fortunate we have this, but I think you’ve got to see people be wise and not get too high with the highs and too low with the lows, but steady growth. I think another thing just factored into a lot of these questions is I think we're very fortunate to have a very good technical school program in South Carolina. … It’s not perfect, but it does help our labor force for these companies that are coming here.

 

Caldwell: I think one thing we can learn is that it's very unpredictable. And so that we need to be prepared. We need to be prepared for a slowdown, but we also need to be prepared for a ramp-up. Because, for example, if I'm looking for an industrial site, which is very difficult for us to find these days, and South Carolina is challenged, some because of topography, but also because we're a little bit of a victim of our own success. We've been so successful in recruiting companies to South Carolina that a lot of the good industrial sites have been taken up. … It takes a decade sometimes to develop a good industrial site, to get it permitted, and all of the wetlands delineated or remediated, get the utilities extended to it, get the logistics and infrastructure. I can't guarantee you that if you build it, they will come, but I can 100 percent guarantee you that if you don't build it, they will not come. And I think the pandemic teaches us that because a lot of states and communities, South Carolina, to a certain degree … were caught off guard by that, we weren't quite ready for that ramp-up in activity that we saw.

 

McGreevy: I think the precipitous drop in rates and companies with capital to burn really facilitated a lot of expansion. And companies had a delay of potentially a year. 2020 happened. Companies are kind of figuring out what's going to go on. Then 2021 comes around and they say, hey, we might have been planning to do something in 2020, and we didn't do it. And now we got this cash sitting out here. Money is cheap, we should go do this. And so, I think that fueled some of the demand in the past couple of years … and I think that helped. I talked about spec stuff earlier. I think developers saw really, really low rates and said, hey, we can do this for a lot cheaper than we used to be able to. We're still seeing pretty high demand for this type of space, and we should go for it. I think a lot of them have probably been proven right on that, which is great. … I think that did kind of ameliorate some of the site concerns that we might have otherwise had, because you had private sector folks taking on some of the infrastructure and pad readiness type work. … In less rate-friendly times, that onus falls on the county or sometimes the state to do that work to get a site ready for a company.

 

Mackie: I think there were a lot of lessons learned, especially from the brokerage aspect of commercial real estate. But I truly believe that a lot of those lessons were learned before Covid. We saw in 2008 here in the Upstate when the rest of the country was really going under a recession or a downturn. ... I feel like South Carolina as a whole, but the Upstate especially was really impacted least and lightest. And it felt, being here and talking with other brokerages around the world, that they were even seeing it. We were recovering very quickly, and we didn't have the same level of impact that you were seeing in other places. And I think for commercial brokerage, especially for the office market, we watched those impacts happen then. And really, the word I want to use is “resiliency.” We realized our resiliency to downturns, to Covid, to pandemics, to things that were impacting other markets because we realized that we have a very pro-business environment here. We have very strong economic developers leading our state, leading our counties, and people want to work. … The world was watching South Carolina during Covid, and they saw that we have this tenacity, this grit. … We work, we see an opportunity and we see something that needs to get done, we’re going to do it. We’re going to find a creative option or alternative, and we're going to work together. ... And I think from the commercial real estate aspect, for me especially, we were very busy during Covid. I had tenants to protect, I had landlords to protect. I had investors that I had to get creative with. People still had to pay their bills. Businesses still wanted to be there in three, six, nine months. When the mandates started coming down from the federal government, we didn't know that they were going to be incentive packages. We didn't know what they were going to look like. People didn't know how they were going to feed their family, let alone keep their lease in place. So that's where we really went to work. … We had to find creative ways to help them stay afloat, whether that was rent-relief packages or allowing a retail or a commercial kitchen, restaurants to put in service windows, walk-up service windows, where the landlord said, you know what? This is worth it to me. Let me help them financially do that to keep their business open. …. So, I felt like we really learned that lesson in the downturn where you stay with the like-minded pro-business people that you've built relationships with, and you get the job done. 

Q. If I understand each of you correctly, there’s not a sea change in office-space use in South Carolina.

 Mackie: I think that there was definitely a change … in the aspect that we saw a lot of companies with forethought that saw larger spaces becoming vacant, because initially there was some pretty big panic. People were trying to drop their real estate as quickly as possible. And so maybe smaller companies went, you know what? I'm going to take advantage of this opportunity. That landlord is going to drop the rate a little or a lot because they're not going to want that vacancy. And so, I've got an opportunity to have the square footage, maybe that I've needed for the last four or five years, and I'm going to go ahead and take that over. And they did. … We saw a lot of movements and a lot of companies taking advantage of those opportunities. What we saw then was when those companies realized, oh, we need to go back to the office. Our people are not productive from home. … We need people back in the office. And now we're seeing that on a much larger scale where large companies – Google, Amazon – they're pulling people back in the office because they continually watch their performance drop. So, we saw those larger companies coming back, going, oh, I need my real estate back. And we're like, sorry, it's been taken. The CBD in Greenville is at a less than 3 percent vacancy for 10,000 square feet and above. So, I think our biggest challenge for office in the Upstate is not having new product, and obviously, until the rates get in line and developers, that's a big risk. I think that once that settles and we continue our efforts to bring corporate headquarters here, we’re going to see a much larger demand. But we don’t have a lot of space.

 Q. Agreed?

Rogers: I agree. From the banking perspective, working for a community bank, typically our exposure is not going to be large tower office space in New York and Chicago; it’s going to be in the Southeast where we’re headquartered. And those markets, as you just heard, are performing quite well. We're not troubled by it, but of course, we’re looking cautiously. … We’re seeing a lot of repurpose of office space, people going from three floors to one. … I just, within the last two years, financed one of the largest office towers in South Carolina, and was happy to do it. So, there’s a lot of opportunity as well.

McGreevy: Yeah, it's interesting. I mean, even just within my firm, it seems to depend on the office and the place as to whether people are coming in or not. And then how our space is being used. I think adaptability has been an interesting part of the office challenge. … I think repurposing, you have a re-envisioning as people are taking a closer look at their real estate holdings, for sure. And then trying to figure out, hey, what are the things that we actually really use the office for? What can we do to make the office a good place to work and collaborate? … Our firm actually just redid their office space up in Greenville. It's a smaller footprint, but there's a lot more conference type space, there's more gathering space. Instead of everybody having a nice big office, the offices are pretty small, but the gathering space is pretty big. And so, I think trying to facilitate the benefits of being together and the collaboration that comes from that is what I think you’ll see going forward.

 

Mackie: It's actually pretty split 50-50 right now with the office market. We had a significant amount of clients that within the last 10 years have gone to collaborative space. Everybody's getting rid of their private offices, and everyone wants to be out in the open and be together. And we are seeing that shift now, especially post-Covid. They've realized that being out in the open air with everybody, that wasn't working. So, we're seeing a very large shift back to private offices. Not as large, obviously, more condensed; we’re not seeing the large executive C-suite offices anymore, but people are going back behind closed doors. A lot of businesses, as you know, cannot operate in a large collaborative area. There is room for confidentiality and private conversations with clients, especially when you’re dealing with legal issues, taxes, real estate. But it's nice to have those areas. And we are seeing that where you can get a group of five, six, 10 people together (to) brainstorm. So, we are definitely seeing that demand for more collaborative space, but definitely going back to hardwall offices.

 

Q. Let’s talk about the future of shopping malls. Are shopping malls, as we’ve traditionally known them, going by the wayside? A lot of them are being repurposed, everything from walking tracks to concert venues. Everything other than retail. That’s a lot of space throughout South Carolina.

 

Caldwell: It is a lot of space, and I think there's a difference between a strip shopping center and a shopping mall just because of the scale and the possibilities of what you can do with that. I mean, some of the best examples that I've seen with some of the old Walmarts and grocery stores … is when they go in, and they do technical training centers associated with the technical colleges. They tend to be in locations that are visible, easy to access by a lot of workforce. And so, it makes it a very convenient place, and it's space that already exists. … It's really been interesting to me because I remember Ivy's and Belk's downtown on Main Street in Greenville. When I was a little girl, my grandmother used to take me there, and then I remember McAlister Square opening and then Haywood Mall. And now the retail is returning to many of these downtown locations. … It started with more boutiques and local stores, and then it expanded. … (But) I think retail, particularly the department stores, are in trouble, and as long as they're in trouble, it's going to be difficult to see how these malls are going to at least stay in their same purpose of shopping.

 

Q. Everybody agree?

 

McGreevy: Yeah, my experience in Charleston has definitely been that it is a challenge to redo a mall. … The upside of the mall is that for a lot of them, they're in a really great spot for a lot of traffic. And so, I think there are opportunities, but because of the way that they're constructed, and you had these big department stores as anchored tenants, and then there are often legal issues associated with the lease on those big spaces. … If there are covenants about what you can and can't put in a space, that can make it awfully difficult for somebody who might have a good vision for how to repurpose it to come in and take over. Originally conceived, it was a good idea because you wanted the anchor tenants to be able to know the types of other things that could go in so they could protect themselves against some kind of diminution in value or maybe a type of business that they didn't want for their type of customers to have to be exposed to. I think now that has created some major challenges for redevelopment of the malls, but I think it's an opportunity. We've talked about public-private partnerships; it’s definitely an opportunity for public-private partnerships and for cities to say, hey, this is really important space. It's not being used well. It can become blight, and we need to figure out a way to get out in front of it. I think it is a challenge.

 

Rogers: I think you've got three different examples right here in Greenville that are all hopefully successful. McAlister Square is repurposed successfully into office. Greenville Mall has been redeveloped in a different, still retail, but not mall format, and Haywood Mall, which by all appearances is flourishing. And so, you've got three different outcomes right here in Greenville under our noses that are all successful. But I’m sure it took a lot of work.

 

Q. Several of you have mentioned public-private partnerships. Can you be more specific on how that would work? And also, I’ll segue into my next question about tax and grant incentives in terms of site selection in South Carolina. Site selectors say they need to understand a state or community’s incentives philosophy, how those incentives are deployed, and the risk involved. So, talk more about how you envision these public-private partnerships and what needs to be done in recruiting or site selection and explaining the use of those incentives compared to our neighboring states.

 

McGreevy: I think those are two different things. I think you got the public-private partnerships, and then you have the incentives conversation. So, I'll start just with public-private partnerships. I think a lot can be done, really, from a tax standpoint. The city and the county have some flexibility on how they can do tax work with private land, private developers. … There's zoning things that they can do. Make sure that if we need different space, if we need different zoning requirements to be able to redevelop something, that the city (or county) is on board with that. … And then sometimes it's an investment of city and or county dollars saying, hey, we will go in on this with you Developer A, whoever that is, and we will go in and redevelop this space, and it's an investment from the city and county’s perspective. Hopefully there's a return for the taxpayer, but sometimes the return is a quality of life or an avoidance of a blight kind of scenario that could have ripple effects across property tax values, really, all around. So, I think there are a number of different ways … that government can get involved with the developer to help in situations like this.

 

Caldwell: I think here in Greenville, there's many examples. Probably the most iconic one is the development of the Hyatt downtown, because there had been a lot of streetscape investment in downtown Greenville. But when the city partnered with the hotelier to develop that property, it really jump-started the transformation of downtown into a place to work, live, and play, and then you can see that happen in other places. … There's been several examples where that's done either through general obligation bonds or it can be done with revenue bonds if there's a revenue source associated with it, like a parking garage or something like that. We invest in parks, for example, and that's typically a public investment, although private money can help with it. But it doesn't have to just be a public good that is an investment in the quality of life and in the economy, because if you have a hotel there, then you're going to be employing people that live in the area. Those people are going to be paying property taxes. They're going to be paying income taxes. So, it's not just the immediate impact, it's the ripple effect as well.

 

McGreevy: And I would echo, like a TIFF or a tax increment finance can be a really great option. Charleston did something similar to the Hyatt with the Charleston Place. That was a long time ago, but that was a block of King and Meeting streets where the city said, hey, we're going to partner with you to develop a first-class downtown hotel. And it revolutionized the Charleston tourism industry, which is now a monster. And parks, too: Charleston Waterfront Park. Charleston's big challenge coming up is going to be this Union Pier project where the state Ports Authority owns all of this land that is going to be sold, at least theoretically, to a developer. … The city is going to have to figure out how to be involved in that project in a way that provides quality opportunities for residents and develops that space in a way that is going to be meaningful. I think it's going to need to be residential, it's going to have some retail, hopefully some office is going to be involved in that. I think a true mixed-use space with some park, hopefully some water access. … It's a huge opportunity. It's one of the last remaining great areas downtown that hasn't been developed. So, I think that’s going to be really interesting.

 

Caldwell: On the incentive side, there's a lot of focus on incentives, but we advise our clients not to let the tail wag the dog. Incentives can make a good location better, but they can't make a bad location good. … We do have a very good business climate. We do have a strong workforce with a solid demographic. We have some property tax issues (where) the proportion of them that falls to industrial, and commercial is not in keeping with their demand. And that has gotten worse, particularly with the passage of Act 388 (in 2006). So, South Carolina has on paper huge incentive packages, and that's because the property tax on personal property and manufacturing machinery equipment for commercial and industrial is huge. And so, to be competitive, they have to have big incentive packages through fee in lieu of tax, special source revenue credit just to get to where many states start before they even apply incentives. … If a county comes in and says, we're going to abate some of our taxes or we're going to extend the infrastructure to your site, that is a partnership in that project, and they're generational investments. We represented Albemarle in their (more than) $1 billion lithium hydroxide facility that's going into Chester County, Richburg. They don’t invest over a billion dollars to just run it for 10 or 15 or 20 years. That facility will be operating here 50, maybe even 100 years from now. I put First Quality in Anderson in 2010, one paper machine, and now they have five paper machines there. They have over a billion dollars in the ground. They have somewhere north of 800 workers. That changes people's lives. And so, when a community steps in and says, we will be able to provide everything from tax abatements to in-kind services to infrastructure investments to training to expedited permitting, that really speaks to their level of commitment to the project and their willingness to partner with the corporation.

 

Mackie: We do hear a lot … from people on the amount of tax incentives that we're giving, and (saying), why are you letting them come here and not pay taxes? We're not doing a good job on some aspects of connecting those dots for them and saying, just what you said, I want you to look at this long-term. A company’s going to bring in 100 people, and these people need homes. We’re developing in the more rural areas because sprawl is happening. Those people demand services. People do not want to continue to drive 20, 30 minutes to the grocery store, to get their hair done. … So, when that sprawl happens, when those people move to those areas, we don't just get that tax base, we then see that expand into services. Well, how are services coming? We need to build it. It's not there. So, it truly impacts the community on a much deeper level. When you are able to provide those incentives, and you are able to partner with your city, with your county, with your state on these incentives, it ultimately ends up becoming good for all when you take care of the infrastructure that you're investing in. And I think that's an area in Greenville that we need to do a far better job on. We need to start repairing our infrastructure and building it properly to keep up with the development that we have.

 

McGreevy: Can I touch on two more things? I completely echo what Didi and Darath both said. I think the good of what comes from the incentives is a really significant benefit for the state and for the county. Especially Chester County. And I think we're going to see more projects going there because there's more land. Sometimes there’s really great infrastructure, sometimes because the state and the county have invested, sometimes they just have great sites. They are transformative investments. There's no question about it. … The state has just rolled out a new brand for the South Carolina Department of Commerce, From Launch to Legacy – and the three pillars that they talked about in terms of projects that they want to attract are advanced energy, life sciences, and corporate headquarters. And what's interesting about the life sciences and corporate headquarters type projects is that we don't have a really great incentive for high-paying jobs. I'm sure that people in government are talking about this and trying to figure out what the answer is. ... I think South Carolina has a lot of really great incentives in the toolkit, but that is one that we don't have that I think some of our competitors have that I think would be really beneficial as we are trying to attract those projects. Sometimes it's a pretty small number of jobs. Historically, South Carolina has incentivized based on capital investment and the number of jobs. And some life science companies, especially startups, may only have five to 10 jobs as they're getting started. But if you give them the support on the front end and it works, and I think we've seen a lot of expansion … you’re going to see companies really love the climate here, and they want to expand here. A lot of it is just getting your foot in the door. And so, if you can give some incentives on the front end to a life science company or corporate headquarters and then see growth and get the higher-paying jobs into the community, I think that’s going to be really good. But I think having a special incentive for high-paying jobs, maybe that's $100,000 or more … that is something we could add to the toolkit.

Q. The Wall Street Journal reported that the Securities and Exchange Commission is questioning some community and regional banks about their exposure to commercial real estate in their loan portfolios, as potential losses on the loans could spur them to further cut lending. The Journal said rising interest rates and high vacancies are pushing commercial property sectors into nearly a tailspin. Is that the case?

 

Rogers: Yes and no. … Whether you're talking about a national, regional, or community bank, that is the national persona of what's going on in the national real estate market. And I’m sure it’s true to a degree. It’s not true in the five states we operate in. Our portfolio is fine. Most banks have had to increase loan-loss reserves a little bit. Does that impact earnings? Yes, certainly it does. But it's not horrific. And that's one of the reasons I enjoy working for a community bank, is we're not broad-brushed with the national paintbrush of, the office market is horrible, therefore we’re not doing office lending no matter where you reside. We can make our own decisions here in Greenville, South Carolina, and I really enjoy that. You touched on regulation. Do banks need to be regulated? Of course we do. We don't need to be overregulated and we don't need to be reactionary-regulated. The 2008 crisis was a credit crisis. There were problem loans everywhere. What happened earlier, about this time last year, there wasn't a bad loan to be seen for the most part. There was a liquidity crisis. So, two very different things happened in ’08 and what happened last year. I think that if you look in South Carolina … there's about 40 banks headquartered in South Carolina. The thresholds of regulation are at 1 billion, 10 billion, and 100 billion (dollars) and keep going. But of those 40 banks, I'm going to say roughly two-thirds are under 1 billion, and there’s a reason for that. Because when you cross that 1 billion, your regulatory costs grow exponentially. It's really hard to survive, or it's hard to remain profitable for your shareholders. … I think that's where our associations and lobbyists are constantly battling that fight for us as an industry to get the regulations right, and I think that’s a critical point. … Yes, we need to be regulated. And the other thing is, I would add, is there's a lot of people entering the banking space that are not necessarily traditional banks. We all need to be regulated the same way. We need to be on same playing field.

 

Q. Is availability of money an issue for anybody else? 

Mackie: (Where) we're seeing the largest impact is that we have borrowers doing commercial projects that borrowed at 3 and 4 percent, and those loans are now coming due, and banks are looking at them and going, we want 8 percent. If you are working with a commercial real estate expert and a specialist in their field, they are working with you constantly to protect you and help you through these situations. And there are things that we can do to help you throughout the term if you’re an investor and you have a long-term lease. We can help you during that time to prepare for things like this. We also stress to a lot of clients that their banking relationship is key to their success. And dealing with a lot of our local and community banks and credit unions, that relationship is a little bit deeper, and they have that one-on-one, and they can walk into his office and talk to them about what’s happening to them with their investment, and they can offer them more creative solutions. And it's a very big difference in dealing with a very large national bank, maybe, that they don't have a local presence and they don’t have anyone they know that they can talk to. So, I think that having those local relationships is key to the success.

 

McGreevy: I'd agree. I think we see projects that need to happen are still happening. It's the ones where maybe if margin matters for the project, then maybe people are taking a pause. But for projects that they have to get to market, that’s still happening.

 

Caldwell: Yeah, I think that's a really good point. When interest rates were near zero, people do really stupid things with their money because they can't earn a return of any size whatsoever by investing in bonds or no-risk or very low risk investments. So, they're chasing a return anywhere they can find them. … And now that those interest rates are going up, we're seeing capital flow to projects and locations that have a better business story to tell. Because if you can invest your money in a long-term CD for 5, 6 percent, why do you want to go and take a big chance on some unproven technology and unproven business case? But I got a call this morning from a project that we have been working for, probably, two years. It's in the building product sector, and they approved the project at the board meeting yesterday. Their lead times right now are 10 months. So, they can't get this project up quickly enough. Now, this is not going in the Southeast. It is more of a national play. But I think it is emblematic of exactly what we were talking about, that the good projects, the ones with a strong balance sheet, the ones with a really strong business case, (it’s a) difference in a few percentage points. From an historical perspective, we're still looking at very low interest rates. And I don't know that we'll ever see them go back as low as we want, as they were before. And quite frankly, I think that's OK. I think we just need to get used to this. … Those projects that have a strong business case are going to move forward.