industrial report | derek mathis
TRANSCRIPT
www.CharlestonCommercialMarketForecast.com
INDUSTRIAL REPORT
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CTAR-CID
COMMERCIAL & INDUSTRIAL MARKET FORECASTDerek J. Mathis, Director of Industrial Development, WestRock
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MARKET DRIVERS
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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
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LOCAL MARKET SNAPSHOT
Source: Colliers
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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
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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
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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
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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
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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
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LOOKING AHEAD…
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• 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
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CTAR-CID
COMMERCIAL & INDUSTRIAL MARKET FORECASTDerek J. Mathis, Director of Industrial Development, [email protected] | 843.851.4722