Greenville-Spartanburg-Anderson, SC (2008-2009)
A Great Place to Live and Work
The counties of Greenville, Spartanburg, and Anderson, SC are part of a Metropolitan Statistical Area (MSA) located along I-85, approximately midway between Charlotte, NC and Atlanta, GA. The MSA and surrounding counties, known as the Upstate, have a population of 1.32 million persons and is known worldwide as a thriving place to live and work. The region has a mild climate and is located within easy driving distance of scenic mountains and beautiful beaches. The cost of living in the Upstate is also generally lower than the national average including a much lower median cost of housing.
Once recognized as the textile center of the world, the Upstate presently has a diversified economy with top companies such as Michelin, BMW, General Electric, Fuji, and Milliken all having major manufacturing and headquarters offices here. The Upstate is also home to a number of research centers including Clemson University's International Center for Automotive research (ICAR), Clemson â€˜s Biotech Research Complex, and the Greenwood Genetic Center and South Carolina's leading life-science incubator. Clemson University also conducts major research in the Plastics and Advanced Materials markets on campus and at its research park nearby. Other universities and colleges include Furman University, Wofford College, Converse College, Presbyterian College, and USC Upstate.
The Upstate of South Carolina is well known globally for its quality manufacturing and its highly trained work force. The area has one of the highest ratios of engineers per capita in the world which is why companies like Fluor, Jacobs Engineering, and CH2M Hill have major offices here. Greenville is the cultural and entertainment center for the region as well as the center for most of the office and professionals work force. Greenville's Downtown is very cosmopolitan and frequently visited by other cities across the United States who want to learn how to best develop a Central Business District and Downtown. On any given night, one can safely walk the Downtown's streets, dine at one of hundreds of restaurants, and see a Broadway play or musical.
Commercial and residential real estate are alive and well in the Upstate. Though stymied by the global recession in 2008, the markets are stable and certainly healthier than many markets in the U.S. and overseas. For example, residential sales decreased by nearly 20% in Greenville County in 2008, but the median price of homes in Greenville increased by 2.4 percent.
The region's office jobs are concentrated in Greenville County which has over 10 million square feet of office space. The vacancy rate for office space was near 13% at the end of 2008. Class A office rents range from $16.50/sf/yr to $25/sf/yr and Class B office rents range from $10/sf/yr to $14.50/sf/yr.
Greenville, Spartanburg, and Anderson have the majority of the national retailers, mostly located near the large indoor malls, except in Greenville where many of the newest power and lifestyle centers have located on Woodruff Road near I-85. The retail vacancy rate ranged from a low of 5% in the malls up to 13% in neighborhood and community centers at the end of 2008. Retail rents vary widely depending upon the type of retail space, i.e. mall, neighborhood center, etc., size of space, and tenant's credit.
The size of the Upstate's total industrial space is quite large. However, a lot of this space is owner occupied manufacturing space and much of this is obsolete due to age and/or technology. The balance of the industrial supply of space, consisting of multi-tenant and single tenant leased space, is quite modern with many facilities having high ceilings, cross docks, ESFR sprinkler systems, and fiber optics. The vacancy rate for multi-tenant and single tenant industrial space was approximately 12 percent the end of 2008. Bulk warehouse rates are going for $2.65/sf/yr for older buildings up to $4.75/sf/yr for new facilities.
As to the investment properties market locally, in 2009 small office, retail, and industrial projects will be feasible where the individual investors have good credit and make personal guarantees. Large commercial investments and developments will probably be on hold or cancelled in 2009 due to more limited loans for large projects and poor market conditions.
Short Term Outlook
As of January 2009 all the commercial market sectors in the Upstate were trending downward in occupancy levels due to the international recession and financial crises. A significant amount of Class A office space was coming onto the market for sublease at the end of 2008 and beginning of 2009, putting downward pressure on office rents as well as increasing lease incentives. Following the national trends, retail vacancy in the region will continue to increase throughout 2009 due to reduced consumer demand and job reductions. Demand for industrial space should also decrease in 2009, but not as dramatically as the declines in the retail and office sectors. In all commercial sectors, as well as in multi-family, there will be very little new construction due to increased credit risks and lower lending levels by the banks.
In summary, 2009 will be a tough year for commercial real estate in the Upstate of South Carolina. However, the Upstate should fair much better than most of the country because our markets did not experience the rapid run-up in supply that was seen in the worse markets the past five to ten years. This hopefully will mean that local demand conditions will catch up to supply much sooner here and we'll see a market recovery in late 2009 and early 2010. In the meanwhile, it will be a market that favors buyers and tenants.
Long Term Outlook
Though the commercial real estate market is bleak for the Upstate short term, the long term is quite promising. The U.S. and global economies will turn around in the next year or two. The Upstate's strategic market location between Charlotte and Atlanta will not change; if anything, it will improve as the traffic increases and the standards of living in these cities deteriorate. More top domestic and global companies will be attracted to the Upstate and invest hundreds of millions in plant, equipment, and research here, hiring tens of thousands of new workers in the coming decade. There will be more shoppers, more housing demands, more demands for modern office, distribution, and manufacturing space. Land prices will resume their above average escalation. Our educational and health facilities and services will improve with a larger tax base.
We need to plan for it because it is going to happen. For those who lease space, there will be plenty of quality choices of space. And for those who make smart investments in commercial real estate, well, there will be substantial rewards. We at First Commercial Realty look forward to the challenges and the rewards.
Market conditions change and specific rental rates and property prices can vary widely by location, product type, and conditions of a property. Please call a First Commercial Realty agent for more specific current rental rates, details on individual properties, and updated market conditions.