Three commercial real estate markets within the Lowcountry — presumably impacted by like economic factors — are trending in divergent directions.
Office properties arguably are the strongest of the group. As more people move into the area and employment shoots up, company headquarters buildings and white collar staff locales report record low vacancy rates and surging rents, according to Lee & Associates' first quarter real estate report on the Charleston area.
Vacancy rates for retail facilities' are low, too, as a strong tourism business encourages new stores and shops to take over empty spaces. But instead of rising like office properties, retail rents are slipping as new construction has weakened demand.
And industrial growth? It stumbled as a few big tenants moved out of their digs, boosting the volume of vacant buildings. Yet rental figures kept rolling upward, notes the commercial agency, which has a Charleston office.
Despite downturns, the trio of property groups are showing strong numbers as the Lowcountry's economy keeps growing healthier.
"Charleston continues to experience dramatic population and job growth, fueled by the port of Charleston and proximity to several large manufacturers," according to Lee & Associates.
The agency in a more detailed look at the Charleston metro real estate markets found upbeat impacts for the most part, including:
Office: Vacancies are below 6 percent, while rents bumped up to $24.50 a square foot "a result of increasing business interest." Also, tech related firms have shown interest in Charleston in recent years, displaying its versatility, Lee & Associates notes. The Lowcountry's allure to the business world has brought about strong net absorption, where open spaces fill up faster than developer build new centers. Investment has increased in Charleston's office sector from less than $100 million a few years ago to more than $310 million in 2017," the firm says, citing CoStar commercial real estate research company.
Retail: Tourism continues to drive the area's thriving retail sector. Developers completed more than 560,000 square feet of new retail construction for 2017, bringing total volume to more than 22 million square feet this year. "Firms such as Boeing, Benefitfocus and PeopleMatter have added thousands of jobs to the market in recent years, increasing both population and job prospects, but also bringing high paying jobs which contribute to retail consumption," according to the commercial broker. Retail vacancies are at a "particularly low" 3 percent, yet rental costs are rising just 1 percent year over year. New construction jumped last year with more than 560,000 square feet ready for move-in locally compared with a decade average of around 385,000 square feet. "Investment has been particularly strong in recent years, averaging more than $300 million a year since 2014," the agency says, relying on new CoStar figures.
Industrial: The Charleston port and area's "robust industrial infrastructure" lure in developers and boosted new properties by 1 million square feet in the past three years. "Industrial investment in our city continues to trend upwards each year exceeding $100 million in (property) exchanges," according to Lee & Associates. Notably, greater Charleston as attracted major firms in recent years such as Boeing, Volvo and Mercedes in part due to the bustling port and available industrial land. "Developers have been active in recent years," the commercial real estate company says, with more than 1 million square feet of buildings completed each year since 2015. Absorption stumbled as a number of larger tenants moved out of their locales. Yet rental prices continue to rise at a 5 percent annual pace, and "investment has gradually trended upward," Lee & Associates points out.
Lee & Associates calls itself a commercial real estate brokerage, management and appraisal services firm established in 1979. The company counts offices throughout the U.S. and Canada. Go to lee-associates.com.