NAI Avant: Charleston area’s manufacturing economy boasts broad-based gains in third quarter, yet faces stiff ‘challenges’
Charleston’s shipments are at a five-year high. Its auto sector sprints forward as the “Boeing effect” propels aircraft gains. All the while, the population multiplies.
At least on the expansion side of the ledger, it’s all good.
Yet the area can’t avoid growing pains. Traffic clogs roads, and questions arise as to whether the workforce stands prepared to handle a shift to “knowledge-based” jobs.
That’s how Derek Mathis, senior broker with NAI Avant commercial real estate firm in Charleston, judges the region’s economic standing as of September — based on figures and personal observations.
In his quarterly report, Mathis cites some impressive numbers in terms of the metro Charleston manufacturing surge.
“We have seen the local economy outpace the U.S. and other comparative metropolitan cities in key areas such as regional job growth and exports,” Mathis says.
“The industrial/manufacturing sector has certainly played a key role in this upward trend and continues to be a steady economic driver,” he says.
Consider: The S.C. State Ports Authority in August had its best volume month since a record high in October 2008. August container totals jumped 5.6 percent year-over-year. Elsewhere, the South Carolina Inland Port in Greer opened, with cargo expected to start moving any time. The SPA projects 40,000 containers within a year and 100,000 annually within five years.
Transportation companies announced expansions and new facility construction. Daimler Vans looks to invest $4.6 million and add 60 jobs in North Charleston.Weber Automotive supplier also disclosed expansion plans and jobs in the works.
Meanwhile, the so-called “Boeing Effect” that’s driving aircraft-related growth beyond original projections includes the manufacturer selecting a site in Palmetto Commerce Park for the construction of its 220,000 square foot — expandable to 600,000 square foot — 737 MAX engineering and assembly operation. That’s on top of Boeing’s revelation in April it would double its footprint in Charleston over the next eight years to bring another 2,000 jobs and $1 billion in investment.
All these jobs are bringing people to the region: The three counties are on line to top 1 million people by 2028, according to the Charleston Metro Chamber of Commerce’s Center for Business Research. The current population? 700,000.
Nonetheless, Mathis strikes a cautionary tone. “The region is not without challenges, however, as growth begins to outpace transportation and infrastructure networks.
“With Charleston undergoing a transformation into a more knowledge-based economy, there are also concerns regarding the availability of skilled human capital needed to fill higher wage industry sectors such as aerospace, IT and automotive,” he says.
Mathis notes that the industrial vacancy rate increased slightly in the third quarter to 7.6 percent. He says the primary reason for the vacancy share increase revolves around American LaFrance exiting its 450,000 square foot plant in Jedburg. But the total’s a little misleading, he says, because Husqvarna executed a lease in September to fill up much of the space.
Other market highlights, he says, include the South Carolina Research Authority buying nine acres in MeadWestvaco’s Nexton development, and a 100,000 square foot office building there expected to launch before year’s end.
“With Charleston’s rapid demographic growth, the new housing and multifamily sectors are performing extremely well,” Mathis says. “This type of growth has a direct impact on the industrial market as we are seeing many housing industry-related companies leasing space.”
After shedding light on recent economic gains, Mathis laid out a wide-ranging market forecast touching on everything from gun control to road projects. Among his positions:
• Look for the automotive sector to continue expanding in metro Charleston, considering the state has recruited more than $5.1 billion in capital investment and more than 8,500 jobs since January 2011.
• The Charleston area could benefit from “the ongoing battle over gun control” as numerous gun manufacturers explore relocation to more “gun friendly” states.
• Based on Boeing’s ongoing growth, the region has seen a “trickle” of aircraft suppliers start to seek space. Such activity should increase as Boeing grows its local footprint. However, “expectations of a sudden influx of Boeing-related suppliers should be tempered, as we do not anticipate this being the case in 2014.”
• Proposed roadway improvements such as the Northside Drive extension, Ashley Phosphate Road “flyover,” Stall Road widening and a Midland Park roundabout, will impact land prices. “We have already seen land prices in the ‘Boeing Corridor’ increase to a point where it is becoming difficult for developers to construct facilities with lease rates acceptable to the general marketplace.”
• Industrial rents moved up slightly in the third quarter to a $4.55/square foot average rate. He says rental rates “will continue modest growth” due to depleted supply in upcoming months.
“Overall, we anticipate continued modest industrial growth in the fourth quarter 2013 with a decrease in overall vacancy and slight uptick in rate,” Mathis says.
For more information, contact David Grubbs, managing principal of the Charleston Office at 843-814-6111 or firstname.lastname@example.org.
Reach Jim Parker at 937-5542 or email@example.com.