By Liz Segrist
Published July 15, 2014
From the July 14 print edition
Speculative building is making a slow comeback in the Charleston market.
Economic developers and industrial brokers have been promoting a need for speculative buildings since the recession put the brakes on construction and development.
Manufacturers and logistics companies looking to move to or expand within South Carolina want to do so quickly. They seek modern, expandable facilities where they can begin operations immediately without having to wait for a build-out or permitting.
Construction began on a speculative building in Crosspoint in 2012, and the building was completed (above) in the first quarter of 2013. It is now fully leased to Boeing, for its research and development team, and to JAS Forwarding. (Photo/Provided/Aerial Photos Elite)
Post-recession construction rates and lack of financing have stymied speculative construction, according to several industrial brokers. But now the Charleston region’s decade-low industrial vacancy rates are enticing private developers to finance speculative buildings, though local brokers say more are needed.
Boeing’s Research and Technology organization will occupy about 100,000 square feet and JAS Forwarding will occupy about 80,000 square feet of the spec building, according to Mike White, Charleston Industrial’s broker in charge of Crosspoint. Boeing spokeswoman Candy Eslinger would not confirm the Boeing site at this time.
“That first facility was significant,” White said. “When that was built and came online last January, it was the first speculative building in the Charleston market in five years.”
Another speculative building in Crosspoint — this one about 270,000 square feet — is under construction with a projected December completion. And 75 acres are cleared for a build-to-suit of up to 1.3 million square feet, White said.
Plans call for up to 10 spec or build-to-suit facilities in the park, White said.
Additionally, Stone Mountain, Ga.-based Pattillo Construction is building a 140,000-square-foot spec building in Palmetto Commerce Park, according to Mike Ferrer, Lincoln Harris’ vice president of office and industrial brokerage. Calls to Pattillo were not returned.
The industrial market has tightened in recent years as locally-based companies, particularly advanced and automotive manufacturers, have expanded. Northeast and West Coast companies also are consolidating operations to Charleston.
Growth from the Port of Charleston, Boeing South Carolina, warehouse and distribution companies, and manufacturers demands more industrial inventory in the market, according to local brokers.
The influx of companies and diversification of industry have created a huge demand for new industrial facilities that are at least 200,000 square feet.
“The demand has been here for six to 12 months already. It becomes frustrating to have a lack of product,” Colliers International Charleston principal Simons Johnson said. “The time is now for new, modern Class A buildings that can be designed both for manufacturing and distribution.”
Johnson expects to see construction begin on at least two more spec buildings within the next year, potentially in North Pointe Industrial Park in Hanahan, Palmetto Commerce Park in North Charleston and Jedburg Industrial Park, north of Summerville.
“In order for the city as a whole to be successful, the construction of more spec buildings and Class A industrial facilities has to occur,” Johnson said. “New buildings must be built.”
Companies scrambled for space pre-recession, often moving into spaces that did not fully meet their needs. Now companies will wait for a facility that meets their needs or expand to another location with a move-in ready facility, according to brokers.
White thinks 2015 will be the turning point for the local industrial market as Boeing increases 787 Dreamliner production rates and expands its footprint. This could drive demand in several sectors.
He expects to see more suppliers move into the area and local suppliers expand, which will further constrain the market and open the door for new construction.
“There will be an increased demand for parts to be there in four hours and not four days, and that will bring suppliers to the market,” White said. “I believe 2015 will be the year the supply base will expand rapidly.”
Ferrer said the real estate boom many anticipated from the Boeing effect and economic recovery have not brought as many deals to the region as expected, but the market is tightening.
Though slower than anticipated, spec building is resurging and companies are committing to longer leases, Ferrer said. White agreed, saying new construction has to happen to continue growth.
“Charleston is the hot place right now and I think we have a lot of reasons to be optimistic,” White said.
Reach staff writer Liz Segrist at 843-849-3119 or @lizsegrist on Twitter.