CITY HIGHLIGHT, APRIL 2008

GREENVILLE CITY HIGHLIGHTS
William D. Crawford, P. Randall Bentley & Austin Guest

Greenville Multifamily Market

Strong increases in both apartment occupancy levels and rental rates have made the Greenville SMSA the target of developer interest. Composed of the major cities of Greenville, Spartanburg and Anderson, this Upstate area also includes smaller bedroom communities like Greer, Simpsonville, Mauldin and Easley. Occupancy rates have been climbing steadily since 2004 and reached their peak of 95.3 percent the last half of 2007 when new projects began coming online. With only a slight tick downward the first of this year, rates are currently at 93.3 percent with the prospect of rising again for the rest of 2008.

Greenville is the hub of the Upstate, with the highest population, and has been referred to as the “economic engine of South Carolina.”  Once known as “the textile capital of the world,” it has transformed itself into a more diverse and international community. Many companies in Greenville are widely recognized as strong competitors in the global marketplace. The most significant transition relates to the impact of the automobile industry. Greenville now plays host to BMW, Michelin, and the Clemson University-International Center for Automobile Research (CU-ICAR). But it is also home to world-class companies such as Lockheed, General Electric and IBM.

Between the years 2002 and 2006, Greenville announced more than $1.4 billion in new capital investment and more than 6000 new jobs. It has been the recipient of more foreign investment per capita than any other region in the U.S in recent decades. It also is home to more than 75 Fortune 500 Companies. Its location between Charlotte and Atlanta, plus ready access to the port of Charleston, has made it a natural for companies relocating to the Southeast.

The lifestyle available in Greenville, however, is no longer a secret. Companies seeking to relocate have discovered a dynamic downtown area offering a myriad of new restaurants, hotels, shopping and entertainment, and growth in the suburbs to satisfy most shopping needs. City government and private enterprise have combined to create a community downtown that is the envy of other cities. The development along the Reedy River has been especially well received by residents, individuals and companies considering relocation.

With growth and attraction of the city, the investment sales market for apartments in Greenville continues to be dynamic. A number of 100-unit properties traded last year, beginning with 266 units at Summer Crest for $87,593 per unit.  Carolina Crossing, a 1967 vintage property, had 156 units that sold for $33,013 per unit. North Slope traded its 156 units mid-year for $36,859 per unit and Pelham Place sold 271 units for $38,192 per unit. Willowick, constructed in 1974, had 180 units trade at $36,111 per unit, followed by Ashmore Bridge at $77,285 per unit for 246 units. The Carlyle, finished in 2006, was sold for $94,643 per unit for 280 units. Finally Cameron Crossing, a project in the southern part of Greenville, sold at $52,525 per unit for 198 units.

McBee Station in downtown Greenville, South Carolina.

Three apartment projects were completed last year. These included Jasmine Cove, a 184-unit project in Simpsonville; a senior low-income project of 48 units near Haywood Mall; and McBee Station, the 197-unit mixed-use, downtown project of Terwilliger, Davis & Leadbetter, which has proven the market for luxury downtown projects. Land costs and availability of sites now dictate projects of four or more levels downtown, but the area will likely see more of these.

An additional 1,795 suburban units are currently under construction. These include the 216-unit Preserve at West View in Greer, being built by Diversified Realty Ventures;  the 252-unit Brookside in Taylors by Lightning Development; Rohman Development’s 305-unit Millennium off Fairforest Way; the addition of 67 units to the conversion project of Pace Burt in The Lofts; Tuscan Heights, a 252-unit development on Dry Pocket Road by STM, Inc;  Alta Brookwood’s 256 units,  by Wood Partners on Brookwood Point Place; Easlan Capital’s 224-unit Vinings on East Butler Road in Mauldin; and another Rohman Development project called Garden District, with 223 units in Simpsonville. 

Finally, additional projects totaling more than 3,000 units have been identified as proposed developments in the SMSA. Prominent among these is the mixed-use development called The Point, off Woodruff Road. Verdae Development is finalizing negotiations with a yet to be announced developer within their huge mixed-use site off Verdae Boulevard. Two other projects in Greer, one in Mauldin, one in Simpsonville, and another in Greenville round out possible projects that have been identified.

The Appalachian Council of Governments computed an absorption rate of 630 units from 2005 to 2006 in the Greenville SMSA. That number was likely higher last year; however ,with the possibility of more than 5,000 new units materializing in the next 18 months, the market is primed for a downturn in late 2009. This has been the pattern of the Greenville market in being extremely attractive to developers, yet not of an adequate size to absorb their concentrated interest when market factors become favorable. Financial markets may intervene to minimize overbuilding by limiting the availability of capital, but the desirability of the Greenville lifestyle, and the ongoing successful efforts of economic development entities will continue to spark growth in the Upstate.

—William D. Crawford, CCIM, is the owner of Greenville, South Carolina-based Crawford Associates.

Greenville Industrial Market

The Greenville/Spartanburg industrial market finished last year with decreased vacancy rates as well as strong absorption, construction and rental rates. Changes in the industrial market continue to be impacted by declines in the textile industry and continued growth in the automobile manufacturing industry. According to the CoStar industrial market report, the Greenville/Spartanburg industrial market ended the fourth quarter of 2007 with a vacancy rate of 10.2 percent compared to 13.2 percent at year-end in 2006 — down 3 percent. Flex projects reported a vacancy rate of 17.9 percent compared to 20.7 percent in 2006 – down 2.8 percent. Warehouse projects had a 10.71 percent vacancy rate at year-end 2007 compared to a 12.8 percent vacancy rate in 2006. Since the Greenville/Spartanburg market is relatively one of the largest industrial markets in the country, national industrial market trends continue to impact the local market.

Average industrial rental rates rose slightly at the end the fourth quarter to $3.09 per square foot signifying an increase of 1 percent from the end of the fourth quarter of 2006. The overall Greenville/Spartanburg market had a net absorption of positive 537,263 square feet in the fourth quarter of last year, compared to a negative absorption of 460,731 square feet in 2006, a significant improvement in the absorption rate.

CoStar reported the Greenville/Spartanburg market’s total industrial inventory to be 146.96 million square feet in 3,251 buildings. The flex sector comprised 8.19 million square feet in 531 projects and the warehouse sector consisted of 138.76 million square feet in 2,720 buildings.

Two significant trends seem to be emerging. The first is a more consistent request for tenants requiring 28-foot clear height, where 24 foot had been the previous market standard or precedent. Secondly, the emergence of green building standards is becoming a factor in the industrial sector.

The Clemson University International Center for Automotive Research (ICAR) is attracting the most attention. The largest lease signings reported last year include the following:

• 215,000 square feet for Cliffstar Corporation in Hampton Park – Building I in Greenville

• 194,300 square feet for Atlas Cold Storage USA, Inc. – 1619 Antioch Church Road in Greenville

• 116,413 square feet for Edward B De Lee Co., Inc. at Community Cash Complex in Spartanburg

Notable deliveries included the 650,000-square-foot Walgreen’s Distribution Center at Hwy 81 and Interstate 85 in Anderson and 342,630-square-foot High Site at John Dodd and N. Blackstock roads in Spartanburg.

There is no significant speculative new construction in the industrial sector. The largest project underway at the end of last year was the Adidas Distribution Center, a 1.8 million-square-foot building, which is a build-to-suit project. Charlotte, N.C.-based Merrifield Partners completed a 66,000-square-foot flex project in Brookfield South. Other recent activity includes the renovation of the former 750,000-square-foot Pillowtex building on Hwy 276 in Mauldin into the multi-tenant Trinity Center and the renovation of the 640,000-square-foot former McCrory Warehouse located at 120 Orion Street in Donaldson Center. Each of these buildings is offering flexible-size units starting at 50,000 square feet.

The Upstate lacks new quality single tenant/user industrial buildings. This is somewhat interesting when foreign companies expect a higher quality building than the metal product that comprises a large segment of the local industrial market. A good example of this is the recent announcement of Koerber choosing a higher quality 50,000-square-foot facility at Hunter Industrial Park in Laurens County. The availability of the work force, lower labor and land costs, and other incentives continue to be a factor in attracting the international industries to the Greenville/Spartanburg market.

— P. Randall Bentley, CCIM, SIOR, is a principal member of Greenville, South Carolina-based Bentley Commercial LLC/CORFAC International.

Greenville Retail Market

The Greenville market continued its moderately paced, consistent growth throughout last year. At year-end, retail inventory had increased by more than 400,000 square feet, which was more than four times the amount of retail growth experienced in 2006. Vacancy rates increased slightly, and were at 7.74 percent by year-end. As those rates increased, average shopping center rental rates decreased to $12.25 from $12.54 a year ago. Much of this decrease can be attributed to the movement of many retailers towards the Woodruff Road corridor. The area has become one of the most dominant corridors in the state, and property owners in the other submarkets have been forced to become more competitive. 

This year many retailers scaled down their expansion and relocation plans, and several of the more ambitious retail developments in the Greenville market have been unable to come to fruition. Magnolia Park Town Center, a mixed-use lifestyle center proposed by Menin Development, has been unable to attract high-end retailers to the former Greenville Mall site. The property is located near the Interstate-85/Woodruff Road interchange, and was originally slated to contain more than 350,000 square feet of retail and restaurant space. Also near the interchange, McChesney Investment Advisors planned for more than 500,000 square feet of retail space at The Point, a mixed-use project, but was unable to secure the anchor tenants necessary to proceed with the project. Crescent Place, a mixed-use development that was to contain over 200,000 square feet of retail space, was recently put on hold by the developer, Merrifield Partners. They cited the retail slowdown as a major factor in their decision.

Though some developers have pulled back due to economic concerns, others maintain a positive outlook. The majority of new development can be attributed to grocery-anchored centers, such as the Delhaize Group penetrating the market heavily with the upscale Food Lion-owned Bloom concept. Also, the development of a new 135,000-square-foot Wal-Mart at the Pelham Road/I-85 interchange has brought new activity and strip center development to the Eastern portion of Greenville County, which has excellent demographics and has historically been underserved. This year, a mixed-use project is anticipated from TIC Properties in Greenville’s thriving downtown area. Plans for redevelopment of the 2-acre site should be revealed in the third quarter.

A recent venture that has proved successful is the new Fresh Market development by Edens & Avant. The project is considered to be a major catalyst in the redevelopment and revitalization of Greenville’s midtown district. This 51,000-square-foot project has prompted developers and investors to seriously consider the once prominent Pleasantburg Drive corridor as a viable long-term opportunity. There is a tremendous amount of potential in the midtown area, as development opportunities on Woodruff Road become minimal. Much of the retail product in this submarket is rather dated, and the economic feasibility of redevelopment is vastly improving. The area will see an increased demand for retail, as construction begins on the 1,200-acre master-planned Verdae development in this year. The area will also benefit from close proximity to Greenville’s downtown area, which has undergone a tremendous transformation and is becoming a tourist destination.

— Austin Guest is a member of the Colliers Keenan Retail Services Group in Greenville, South Carolina.

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