Marcus & Millichap

Charleston Industrial Investment Forecast

Charleston Metro Area, 2018 Outlook

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Favorable Initial Yields in Primary East Coast Container Hub Entice Investors

Development elevated in metro’s main thoroughfare. The Port of Charleston’s accelerated growth since the recession and the ongoing dredging process aimed at improving shipping access and allowing utility for larger vessels make the metro’s industrial market attractive. The deepened harbor will increase foreign exposure and incite developer interest. This year, Charleston registers one the largest completion sums among Southeastern metros while nearly quadrupling its 2017 total. The vast majority of 2018’s construction activity takes place in the I-26 corridor extending from North Charleston to Ridgeville. The auto industry leads this year’s industrial development as Mercedes Benz and Volvo add facilities in the metro’s northern sections. Volvo takes on the larger of the two manufacturing projects at 2.3 million square feet while the new Mercedes Benz plant will occupy 1 million square feet. Elevated deliveries result in vacancy jumping for the second consecutive year, although this year’s increase will be slightly less significant as 78 percent of new space is owner-occupied or already pre-leased.

North parts of metro offer extensive options. As the port’s efficiency has improved in recent years, Charleston has evolved into a prominent industrial metro on the Eastern Seaboard, capturing an increasing amount of out-of-state capital. Historically, buyers from the Northeast and those arriving from California have primarily focused on properties in the Yellow House Landing neighborhood. These assets typically include upgraded amenities and sale prices upward of $12 million, along with initial yields in the lower-6 percent band. Class B/C warehouses near Limestone College attract a number of local investors at cap rates in the high-8 percent range. Facilities in this area generally represent 1980s construction, presenting buyers with viable value-add opportunities.

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