industrial report | derek mathis

www.CharlestonCommercialMarketForecast.com

INDUSTRIAL REPORT


CTAR-CID

COMMERCIAL & INDUSTRIAL MARKET FORECASTDerek J. Mathis, Director of Industrial Development, WestRock


MARKET DRIVERS


NATIONAL/REGIONAL TRENDSNational:• 21 quarters of positive net absorption• 6.7% vacancy• Rental rate growth is up 3.5% YOY.

Tighter markets in the 5% range• Demand outpacing new product delivery

in most major markets • Cap rates compressed• Cargo shift• Projected occupancy gains of 380mm SF

in warehouse/distribution space from 2014-2017

Regional:• Mirrors national trends relative to

absorption, rent growth and vacancy rates

• Significant speculative and BTSFL development underway in larger regional metros such as ATL, CLT, GSP and SAV


LOCAL MARKET SNAPSHOT

Source: Colliers


LOCAL TRENDSTYPE OF ACTIVITY?• FDI driving SC economy• Balanced mix of manufacturing and

distributionWHERE?• Prospects prefer “project ready” locations• Infill traditionally preferred location but that

is changing • Jedburg sub-market activity has increased

significantlyWHY?• Favorable business climate• Right to Work• Infrastructure• Clustering• Reshoring trend• It’s Charleston…

Relative to prior periodMarket Indicators+

Vacancy

Net absorption

Construction

Rental Rate

+ +

Note: Construction is the change in Under Construction*Projected

Q2 2015 Q3 2015*

+Source: Colliers International

WRK – Active projects by type

54% Manufacturing 45% Distribution

1% Other

LOCAL TRENDS• Mix of leasing and sales

• Notable transactions

• Rent Growth

• Class A rents pushing north of $5/sf (light mfg related)

• Class A distribution space now in the upper $4/sf range

• Speculative Development

• Childress Klein

• Patillo

• WestRock/SunCap

• Atlas Commerce

• More to come???

• Strong demand for particular product types

• Light manufacturing

• 20,000 – 50,000 SF conditioned space

Source: JLL


Case Study: GERBER CHILDRENSWEAR

Market Impact?• $33mm in investment• 100-125 jobs• Further reinforces/validates the Jedburg market

as viable location for large distribution projects

Why Berkeley County?• Logistical advantages (proximity to Port and growth markets)• Favorable business climate• Available economic incentives• Operational cost efficiencies to be achieved

Why Rockefeller – MWV Foreign Trade Zone Park?• Speed to market/site readiness• Confidence in Development team’s ability to deliver• Costs• Connectivity to future Exit 197 along with Nexton

amenities and housing• Class A environment and neighboring tenants help to

ensure long term valuation of asset


STRENGTHS

Quality of life

Breadth of industry

Strong Port

Pro-business leadership

OPPORTUNITIES

Momentum

Ability to attract and retain talent

Public/Private collaboration

WEAKNESSES

Lack of product

Perception that CHS is too expensive

THREATS

Infrastructure

Workforce availability

SWOT

STRENGTHS


WHAT DO COMPANIES WANT?-Site readiness-Attractive business environment (taxes, incentives, permitting)-Labor Pool (cost, availability, education, skill level, training)-Infrastructure/global access (transportation infrastructure, energy costs, intermodal capabilities, certified sites)-Quality of life


THREATS• Workforce

• Perception among site consultants• Perfect our value proposition

backed by facts• Quantify via labor study

• Infrastructure• Needed: $1.4B per year until 2040• Estimated 1/3 of SC primary and

interstate roads are in poor -mediocre condition

• Current gas "user fee": $0.16/galUser fee has not increased since 1987

• 4th lowest in nation• User fee does not increase with

price of fuel. Revenues grow via consumption

• 50% of SC roads not eligible for Federal funding


LOOKING AHEAD…


• Recession on horizon? Indicators say yes• Feds will raise rates in 2015 – or will they?• Rising dollar makes exports less competitive• Industrial sector continues steady improvement • Continued “reshoring” trend – FDI • We will see impact from growth of E-Commerce/Omni-Channel “Ship-from-Store” trend• Locally, automotive will be dominant market driver. Temper expectations on suppliers• Tech sector growth due to clustering and quality of life for entrepreneurs• More Jobs + More People = Increased interest from “outside” investors/developers seeking

yield (increased appetite for risk)• Panama Canal expansion and Port investments bode well for our region• Inland port continues to exceed expectations• Increased development activity in the I-26 Jedburg/Ridgeville sub-markets • Additional spec product to come online in 2016• Congestion issues could cause a mini-migration from certain sub-markets• Continued rent growth• Tri-County region becomes SC’s dominant market in terms of deal flow

PREDICTIONS


CTAR-CID

COMMERCIAL & INDUSTRIAL MARKET FORECASTDerek J. Mathis, Director of Industrial Development, [email protected] | 843.851.4722

industrial report | derek mathis

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