SOUTHEAST SNAPSHOT, JUNE 2006

Greenville/Spartanburg, South Carolina Industrial Market

The Upstate South Carolina market is strategically located along the Interstate 85 corridor about midway between Charlotte, North Carolina, and Atlanta, Georgia. Strengthening national industrial trends have been slow to affect the local market but vacancies are declining and expected to drop further as the national and local economy improves. Declines in textile manufacturing have been softened by expansions in the automobile manufacturing industry and other industries that have expanded and/or have moved or announced moves into the area.

The trend in industrial development in the Greenville/Spartanburg area is somewhat reflective of a national trend in that we have seen several large intensive labor manufacturers closing their doors and relocating to Mexico or overseas for cheaper labor in order to remain competitive. The impact on the textile industry has been significant along with other manufacturers such as Kemet, which makes capacitors for computers and employs a large number of people in Greenville and Laurens counties. Once again we are mirroring the national economy as we see a loss in manufacturing jobs and an increase in employment in the service and warehouse sectors.

The Greenville/Spartanburg inventory of industrial buildings is fairly evenly divided between manufacturing and warehousing. The warehouse market has seen a fairly high vacancy rate at 17 percent, but is on the way down as warehousing is being absorbed at a faster rate than vacant industrial buildings. Many of the older manufacturing plants do not convert well to warehousing because of low ceilings and the lack of dock space. However, newer industrial buildings with higher ceilings can often be converted fairly easily.

Overall, vacancy in both manufacturing and warehouse remains around 13 percent. Rental rates average in the $2.50 to $3.50 per square foot range. Older buildings may often be less and newer buildings considerably higher depending age, ceiling height, air conditioning and other factors.

Last year, Winn-Dixie closed their 800,000 square foot office and distribution center on Wade Hampton Boulevard (Highway 29), which added significant vacancy to the market. However, the property has recently been put under contract to an undisclosed party and should soon be back in use as a distribution center or as a redevelopment opportunity. The 650,000-square-foot former Woolworth warehouse at Donaldson Center Industrial Park has recently been purchased by the Hollingsworth Companies of Tennessee, which will be upgrading the building to increase its appeal to a larger market. The increasing cost of new construction has made some older buildings with higher ceilings and good dockage appealing to investors as they can be renovated and still compete somewhat favorably with new construction. Forsite Development Partners of Charlotte recently purchased the former 126,000-square-foot Vermont America building in Fountain Inn and have made significant upgrades to reposition it in the market.

This past year saw the opening of Walgreen’s new 700,000-square-foot, state-of-the-art distribution center in Anderson as well as several other significant announcements in the upstate area. New initiatives like the International Center for Automotive Research (ICAR) along I-85 backed by Clemson University, BMW and Michelin, and the adjacent Millennium Campus aimed at recruiting corporate headquarters from biomedical, pharmaceutical and aerospace industries should help revive this market. These projects received commitments from Timken Company and Hubbell Lighting for a 175,000-square-foot headquarters.

Greenville/Spartanburg as well as the entire upstate area is changing to meet the challenges of the future.

— Ford H. Borders, SIOR, is an industrial broker and partner at NAI Earle Furman in Greenville, South Carolina.

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