Charleston Industrial Market Preview

The local, regional, and national industrial market is in an unprecedented period of high demand and low supply. The demand for warehousing space has never been greater than it is now due to increasing e-commerce sales, continental supply chain formation, and increased needs for inventories of all forms. Businesses operating in the US face challenges with growth unless new warehouse supply is available to them and their suppliers. The headwinds to new supply include heightened permitting timeframes, tightening regulatory actions, constantly increasing construction material costs, and limited labor availability. These factors combine to create a low amount of available space which continues to go lower.

Demand is reflected in the current low market vacancy. Quarter end vacancy is around 4%, and the bulk of that 4% is likely soon to be leased. We expect that rental rates will likely increase as a result of the compressing vacancy. We continue to see new requirements popping up with several large build to suit requirements in the market. Recent leasing include the 100% pre-leasing of Silverman's 537,000 square foot building and NorthPoint's 248,000 square foot building, both in Summerville. The reason for the pre-leasing is that prospects need to move in quickly, driving the need for new move-in ready space.

Despite the current headwinds, we have a record amount of square footage currently under construction at 6.7 million square feet. The bulk of that is Walmart's 3mm square foot distribution center located in the Ridgeville submarket. Also, roughly 1.5 million square feet is under construction in the remaining two buildings in Charleston Trade Center. Trinity Capital is under construction on roughly 850,000 square feet in Palmetto Commerce Parkway. Scannell is under construction on 629,000 square feet in two buildings, one of which is committed. The market certainly needs the square footage as there are only 6 buildings with current availability over 100,000 square feet.

Given the low availability and high demand, we are excited about the prospect of additional new inventory coming online. Prospective businesses need the space as quickly as possible for their customers or their own accounts. The difficulty in delivering new space is driving the desire for both users and developers to find entitled, shovel ready sites. Across the board, the Charleston industrial market is strong and poised for growth.