CITY HIGHLIGHT, APRIL 2004

GREENVILLE/SPARTANBURG BRANCHES OUT

Hughes Development Corporation, Windsor/Aughtry, Cooper Carry, Allora LLC and Innocenti & Webel are working on Riverplace, a mixed-use development in downtown Greenville. Plans are underway for the construction of 87,000 square feet of Class A space as one component of the project.

Greenville and Spartanburg, South Carolina, have suffered from the loss of jobs, particularly in the textile industry, in the last few years. However, the area is attracting more businesses, which benefit the local economy and all branches of real estate. In particular, the planned International Center for Automotive Research and Pickens County Industrial Park will attract office and industrial users, which will create jobs to bring people into the area, thereby filling multifamily units and shopping centers.

Office

Office space in Greenville/Spartanburg covers three submarkets with a total inventory of 9.5 million square feet. Vacancy for the entire market began rising in 2000 to a record 21 percent at the end of 2003. Developers took note and put most speculative projects on hold. New product delivered last year totaled 343,000 square feet, 74 percent of which was build-to-suit.

Even though the Greenville/Spartanburg office market has taken its share of hits in recent years, there are signs of recovery on several fronts. Positive national indicators and local economic activity are giving office professionals hope for this year and beyond.

The International Center for Automotive Research (ICAR) is now official and is expected to have a far-reaching impact on Greenville’s office market. This 400-acre research park will house the new Clemson University Graduate Automotive Engineering Center and the BMW Information Technology Research Center. The office sector, specifically Greenville’s suburban submarket, should benefit from ICAR’s ripple effect. This particular submarket has been the hardest hit by economic woes, where vacancy rose to 28.9 percent during 2003. In recent years, Liberty Property Trust has been the biggest player in the suburbs, having developed Independence Corporate Park and the Guardian Building Products headquarters.

Downtown Greenville continues to be the area’s most stable and popular submarket. Vacancy peaked in early 2001 at 19 percent, but today’s vacancy rate stands at 15 percent overall and at 12.5 percent for Class A space. New construction has been minimal, with only two small projects delivered since 2001. In anticipation of improved conditions, plans are now underway for the construction of 87,000 square feet of Class A space as one component of the $65 million Riverplace mixed-use development. Partners in this effort include Greenville-based Hughes Development Corporation, Windsor/Aughtry, Cooper Carry, Allora LLC and Innocenti & Webel.

Development activity in downtown Spartanburg has been on the upswing since 2002. New space totals 216,000 square feet, including build-to-suit projects for Advance America and Extended Stay. This year, the QS/1 Datasystems headquarters and First South Bank will add an additional 150,000 square feet.

— Hara Knight, client services and research manager, Grubb & Ellis|The Furman Company

Industrial

The upstate area of South Carolina has experienced a loss of jobs like many parts of the country. This area has probably suffered more losses than others because of the labor-intense textile industry, which has been a staple of the local economy for a long time. However, other industries have suffered as well. Carolina Circuits, a printed circuit boards manufacturer, recently closed a 350,000-square-foot plant, and Kemet Electronics, a computer parts manufacturer, is in the process of relocating a major portion of its Simpsonville operations offshore. Even with these losses, though, the unemployment rate remains at about 6.6 percent.

There are more industrial buildings available in the state and this area than ever before. Overall vacancy in the upstate is running around 14 percent. The market for smaller buildings is in better shape than the market for buildings of 50,000 to 100,000 square feet. Buildings containing space of 100,000 square feet and larger are feeling the most pressure. Lease rates and sales prices have softened due to these vacancies.

Some recent announcements suggest that the area will soon take an upswing. Reliable Automatic Sprinkler Company recently announced the construction of a 300,000-square-foot manufacturing plant, which will create 350 new jobs, in the new Pickens County Industrial Park. Sterilite Manufacturing is constructing a 1 million-square-foot plant in Laurens County. Dollar General announced plans to build a 1.1 million-square-foot distribution center in Union County, and Walgreens is planning a 700,000-square-foot distribution center in Anderson County.

ICAR will be a major catalyst for future industrial growth, too. Rosen Associates is developing the research park in Greenville County that will eventually house automobile research and development firms and automobile-related industries.

— Ford Borders, NAI Earle Furman LLC

Retail

The Greenville/Spartanburg/Anderson metropolitan statistical area serves a population of more than 1 million. Two new 20,000-square-foot shopping centers will be delivered in Spartanburg this year, but the majority of retail activity is in Greenville and its bedroom communities.

Downtown Greenville, after losing its retail base to suburban shopping malls, is enjoying a residential and retail revitalization. The transformation of historic buildings into street-level shops and restaurants with upper-level residential units has earned the city of Greenville the prestigious Great American Main Street Award from the National Trust for Historic Preservation. Projects include the former Mills Mill being converted to a 105-unit condominium project, a 16,000-square-foot medical building and a 14,000-square-foot retail and office center that is expected to open by June. Other nearby cities, such as Travelers Rest, Greer, Simpsonville and Easley, are also redefining their downtowns to preserve their business districts. Some cities are using tax incentive finance districts to generate money for improvements.

The Shops at Greenridge, a much anticipated retail center located at the convergence of Interstates 85 and 385 with Woodruff Road in Greenville, is finally coming to fruition. Charlotte, North Carolina-based Crosland/Core Development is developing the 575,000-square-foot shopping village on the 70-acre tract. When the project opens in the first half of 2005, it will be Greenville’s third largest shopping center following Haywood and Greenville malls. Lowe’s Home Improvement Warehouse and Best Buy will be among the 11 anchor tenants at the $64 million center. The premier land site was purchased for $14.1 million, or approximately $200,000 per acre. Plans call for the anchor stores to be arranged in a horseshoe, with smaller shops and an outdoor entertainment space in the center and seven outparcels along Woodruff Road.

U.S. 29, also known as Wade Hampton Boulevard, is experiencing a burst of development and redevelopment in Greer. Wal-Mart Supercenter, The Home Depot, Lowe’s Home Improvement Warehouse, Eckerd and Walgreens have established a retail hub in Greer. Target will open a store in October at the new $30 million North Hampton Market, located at Wade Hampton Boulevard and Fairview Road. A former Chevrolet dealer has been razed to make way for additional retail sites. Retail growth has been fueled by 60 residential developments, totaling more than 4,100 units, which are currently either in the proposal stage or are under construction. Wal-Mart is expanding its Taylors Square location by 73,000 square feet.

Simpsonville is coming of age from a retail perspective. The first half of the 238,000-square-foot Fairview Corners, located at the intersection of Fairview and Harrison Bridge roads, is fully leased. The second phase of the new Target-anchored center has less than 20,000 square feet vacant. At the same intersection, T.J. Maxx, Ross Dress For Less, Pier 1 Imports and several restaurants opened this spring. A new 100,000-square-foot Kohl’s opened last fall at Fairview Station, and Bi-Lo opened a new 48,000-square-foot store south of the new Kohl’s. In addition, an Atlanta developer is reportedly developing between 70,000 and 100,000 square feet of retail on 18.5 acres at the southern end of the Fairview Market shopping center.

Easley grew by 17 percent from 1990 to 2000. In response, developers spent more than $53 million in 2002 and $47 million in 2003 on residential and commercial projects. The increased population and ease of traffic flow have positioned Easley as a growing bedroom community of Greenville. Commercial projects in 2003 included a new Publix along U.S. 123, two Dollar General stores and a variety of restaurants and service tenants, as well as multifamily units and professional offices.

Travelers Rest is also experiencing residential and commercial growth. By 2007, the area is expected to grow 8.75 percent and median household incomes are expected to rise by 12.4 percent. Plans are underway for 250 new residences in the next 2 years, with 100 more possible if the annexing of 36 acres on U.S. 276 is approved. A new Lowe’s Home Improvement Warehouse, which is under construction near Cherrydale Point shopping center, is expected to contribute to the growth of northern Greenville County. Rezoning of land off of U.S. 25 has also cleared the way for a new Wal-Mart Supercenter.

Recent transactions include the acquisition of Publix at Woodruff by Equity One. The North Miami Beach, Florida-based real estate investment trust paid Secured Properties Investors XIII $8 million for the property. Woodruff is anchored by a 47,955-square-foot Publix and includes 20,100 square feet of local tenant space. The center was 98 percent leased at the time of sale.

In November 2003, Portland Investment Company of America acquired Plaza at Greenville Mall from DRA Advisors Inc. for $25 million. Plaza at Greenville Mall, a 194,488-square-foot community center anchored by Bed Bath & Beyond, Old Navy, Party City, AC Moore, Goody’s Family Clothing and CompUSA, is located adjacent to Greenville Mall at the junction of I-85, I-385 and Woodruff Road.

In Spartanburg, Inland Real Estate Acquisitions recently acquired Cedar Springs Shopping Center from Cedar Springs Crossing Associates LLC for $10.15 million.

— Lynn Leonard, vice president of marketing, NewBridge Retail Advisors

Multifamily

Apartment owners in the Greenville/Spartanburg market continue to struggle with a high vacancy of around 12.3 percent, according to a fourth quarter 2003 survey by Reis. The vacancy rate is significantly higher than the national average vacancy of 6.9 percent and is higher than the 11.7 percent vacancy rate in Greenville/ Spartanburg 1 year ago. Effective rents and occupancies both declined last year, and approximately 65 percent of all apartment properties are now offering concessions.

“Depressed employment growth, new units introduced into the market and low interest rates for single-family homeowners have had an exponential effect here as they have in most markets,” says William Buford Jr., a multifamily broker with Marcus & Millichap. “Employment growth should turn positive with the BMW expansion and the new ICAR serving as major economic drivers. However, we think apartments will continue to face competition from single-family homes until rates reach 8 percent. We don’t look for that to happen for the next 12 to 18 months.”

Multifamily development in the region has slowed but not ceased. During the last 6 to 8 months, more than 600 units have been completed. Also, more than 400 units are presently under construction.

“The area with the most activity is western Spartanburg County, where there are nearly 1,000 units proposed with 224 units presently under construction,” says Denton Burnette, a vice president with Professional Mortgage Company. Spartanburg County currently has a vacancy level of 13.6 percent, according to the Reis survey.

The Central Greenville submarket appears to be tightening. The Reis survey reports that this area’s vacancy rate decreased last year from 11.6 percent in the third quarter to 10.6 percent in the fourth quarter. This was the only submarket to show a substantial decline.

While Greenville County has seen limited construction of conventional multifamily projects, there is significant activity downtown for condominiums and townhomes. These projects include the 79-unit Poinsett Corners, the 105-unit conversion of the former Mills Mill and the proposed 30-unit Bookends project. An additional 50 units will be part of a $65 million mixed-use Riverplace development along the Reedy River.

— Michael Dodds, managing director, Integra Realty Resources - South Carolina

©2004 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.