Bookended by thriving development in Charleston and the Upstate, South Carolina’s economic growth is expected to outpace the nation’s through 2017 and add 110,000 jobs by the end of next year.
The Palmetto State, with its growing industrial might and diversified base, should see economic growth of 3.6 percent this year and 3.8 percent in 2017, Wells Fargo Securities economists Mark Vitner and Misa Batcheller said in a recent report.
For comparison, the U.S. economy is expected to expand 1.4 percent this year and 2.1 percent next year.
“South Carolina’s economy continues to be more firmly anchored in industrial development,” the report said.
The economists pointed to the widening of the Panama Canal and the opening of an inland port at Greer in the Upstate as setting off a development boom for warehouse and industrial space.
The Charleston area picked up 1.3 million square feet of industrial space in the first quarter. For all of 2015, the region delivered 1.1 million square feet of similar space.
About 945,000 square feet of industrial space was absorbed during the first quarter, resulting in a slight uptick in the vacancy rate to 9.9 percent, according to the Wells Fargo report.
Economists don’t expect the extra real estate to sit idle very long.
“Given manufacturers’ and distributors’ increasing demand for space, the unleased buildings are likely to be absorbed in the coming quarters,” Vitner and Batcheller said in the report.
The desire to set up shop in Charleston also has pushed up asking rents for warehouse space. At $5.20 per square foot for the past quarter, they are now 4.5 percent higher than a year ago and 2.2 percent more than the first quarter of 2016, according to commercial real estate firm Lee & Associates’ quarterly report on the Charleston area’s market.
In the Lowcountry, manufacturing employment jumped 6 percent over the past year, accounting for 1,400 new jobs, the Wells Fargo economists said.
“Much of that growth reflects the ramp up of production at aircraft manufacturer Boeing,” the report said.
Boeing makes parts for and assembles the 787 Dreamliner passenger jet in North Charleston. It has been steadily increasing production to fill a backlog of orders.
“This expansion has been very much a big-city expansion in the Carolinas,” Vitner said, pointing to Charleston, Charlotte and Raleigh as the standouts. “This is the decade of downtown development. In Charleston, you can see it out your window.”
Vitner added Charleston is different from all other big-city markets in the Carolinas.
“It has a large historic district, growth at the College of Charleston and a lot more interest in living close to the city, particularly among younger persons,” he said.
The economists also pointed to Volvo Cars’ construction of a $500 million car plant in Berkeley County and Mercedes-Benz Vans’ recent ground-breaking for a similar investment in North Charleston as promising signs of future growth as suppliers follow them to the Lowcountry.
The influx of new industry and service-providers has also led to a boom in apartment construction. About 15,000 units could join the nearly 35,000 already on the ground in the Charleston area, according to Cathy Hontz of RentPath of Mount Pleasant and a board member of the Charleston Apartment Association.
The Wells Fargo economists expect the number of new apartment units in the state to decline slightly over the next year or so, from more than 6,700 permitted units last year to 5,400 next year. That’s still more than twice the number from just five years ago.
Apartments in 2015 accounted for about one-fifth of the roughly 30,400 residential building permits in South Carolina. By the end of next year, they are projected to be less than one-sixth of the expected 33,400 building permits issued for residential construction.
Charleston’s cache as an international tourist draw didn’t escape the economists’ attention, either.
They pointed to travel magazine Conde Nast Traveler for naming the Holy City one of the top tourist destinations in America for five years running. Last month, Travel + Leisure magazine’s readers voted Charleston the No. 1 visitor destination in the world.
Those accolades fueled a spate of hotel development not only in the downtown area, but also across the region. No fewer than 25 new lodgings are under construction or in the planning stages throughout the Charleston area, poised to add hundreds of new rooms to the nearly 16,000 already existing in Charleston County alone.
“Long driven by tourism, seasonal visitors and higher education, Charleston’s economy has become much more diverse in recent years,” Vitner and his colleague said.
They also mentioned the region’s growing technology sector and revitalization of upper King Street, luring younger workers to what’s been called Silicon Harbor.
Software maker Blackbaud Inc. is undergoing a $154 million expansion on Daniel Island, and a number of tech startups now call the Charleston market home, attracting investors to the region.
The Upstate, driven by BMW’s expansion, the inland port and a $1.4 billion investment by Toray Industries, a supplier to Boeing, continues to thrive along the Interstate 85 corridor between the Southeastern hubs of Atlanta and Charlotte.
Myrtle Beach continues to thrive, welcoming 17 million visitors a year, according to the report. It’s also popular for retirees and seasonal visitors from the Midwest and Canada.
“The Myrtle Beach area has been the fifth fastest-growing metropolitan area (in the nation) over the past five years, which has helped reinvigorate the retail market,” the report said.
The Charlotte-based economists’ report focused on the Carolinas region as a whole as well.
“We look for the Carolinas’ economy to continue to grow solidly over the coming year,” the said.
Reach Warren L. Wise at 843-937-5524 or twitter.com/warrenlancewise.