SOUTHEAST SNAPSHOT, AUGUST 2007

Greenville, South Carolina Office Market

There is a significant vacancy gap between Class A and Class B office properties in the Greenville/Spartanburg area. The spread is one of the largest in the country. Class B properties are struggling to complete with a slightly overbuilt office condo product.

There is a significant amount of office development around the Interstate 85 and I-385 interchange, which is emerging as a strong area for new development. While the area lacks the amenities of a downtown environment, it is more accessible to the remainder of the Upstate market.

Several buildings have recently been completed in the area including three buildings at Clemson University International Center for Automotive Research (CU-ICAR); Hubbell Lighting’s headquarters; and 7 Independence Point. Several buildings are under construction as part of The South Financial Group campus; and developments such as The Point, Millenium Campus, Magnolia Park Town Center, the Verdae Development, and four more phases of CU-ICAR.

The biggest impact of these developments on the market is the potential challenge it presents to Greenville’s heralded downtown. Traditionally, downtown Greenville is viewed as the “place to be” when it comes to office development. Concentrated, high-quality development at the I-85 and I-385 interchange could challenge that assertion, at least in the short-term. There is some development taking place downtown as it is one of the Southeast’s most attractive downtowns. However, there is a significant amount of activity around the I-85 and I-385 interchange. While there are several reasons, the most significant is probably the timing of the transfer of the estate of John D. Hollingsworth, who owned much of the land currently being developed.

The largest lease of the quarter would have to be Fluor Corporation’s expansion of approximately 40,000 square feet at Patewood Plaza. By the end of the third quarter, Fluor Corporation will have expanded by more than 200,000 square feet in the last 4 quarters. Currently rental rates stand at $19.34 per square foot in the CBD and $16.48 per square foot in the suburbs. Vacancy rates are at 7.7 percent for Class A CBD and 13.9 percent for Class A in the suburbs.

The Upstate market is seeing benefits from not having endured unrealistic price appreciations of real estate in the past 5 to 10 years. While other markets are striving to reach equilibrium, Greenville/Spartanburg continues to enjoy steady growth.

— Brian Reed is a research manager for Grubb & Ellis|The Furman Company in Greenville, South Carolina.


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