Selling or buying a shopping plaza, business center or factory is not the same as switching title on a house or lot. Predictably, the markets differ, too.
While home sales and purchases have begun to pick up after a five-year slump, the commercial end has gone through a more cyclical phase.
In the Charleston area, retail and office locales are showing increases in the volume of occupied space.
Industrial properties, meanwhile, may be a year away from a surge.
“The Charleston market has been aided by the arrival of several big name industries and some of their related suppliers,” says Grubb & Ellis/WRS Real Estate Advisors in its third quarter 2011 outlook.
Boeing delivered its first 787 Dreamliner to Japan Airlines and Dupont opened a $500 million plant in Berkeley County, adding 140 jobs, according to the report.
Grubb & Ellis/WRS believes that industrial vacancy rates, the percentage of space that’s empty, won’t drop below 10 percent until this fall. Property sales prices will remain below the cost to replace equipment and goods at least through the winter.
The commercial property advisor is more bullish on the industrial field long-term. “This market is a bright spot in the national picture, as the fundamentals of the Charleston market compel global industry to consider locating here,” according to the report. “The economics of the area, with non-union labor, port infrastructure, cheap utilities and pro-growth public policies help to sell the case.”
By contrast, the greater Charleston retail market is already going through a strong phase.
Shopping centers are filling up, which should continue for the next months. “Development activity should increase as the retail market vacancy continues to decrease and rental rates begin their ascent,” the report points out. With an expanding list of quality tenants, the speed with which leases are completed should increase.
There is very little new space now being introduced into the market, the report says. That’s a sign that developers will start building new centers soon.
Singled out in the report is the peninsula business district north of Calhoun Street.
“There has been a significant increase in activity along upper King Street and the surrounding neighborhoods as new multifamily and hospitality projects are gaining traction; some are set to break ground as early as the first part of 2012,” according to Grubb & Ellis/WRS.
“This is quickly becoming the entertainment district of Charleston as several restaurants and bars have opened or are under construction.”
Compared with the storefront business, the office market is in a rut: the limited good news was a slight drop in the vacancy rate.
“Overall leasing activity is subdued,” Grubb & Ellis/WRS says. Landlords are avoiding the costs it takes to find new tenants, while businesses are trying to stay away from moving costs.
On top of that, few new office buildings or parks have opened.
One section of the Charleston area has bucked the trend, the city’s Central Business District. The area is “still the bright spot, with a vacancy below 10 percent.” But there’s not enough top-of the-line office space “even with the pending completion of the 63,000-square-foot building at 25 Calhoun Street.” Already 25 percent leased, it is the first sizable addition to the downtown office inventory in several years, the report says.
Grubb & Ellis/WRS foresees a level year. Growth will continue but will be lukewarm. Incentives will taper off, and rental asking rates will begin to rise. Property sales, meanwhile, will remain soft.
“If there is one phrase that summarizes the current market, it is 'uncertainty still reigns,'” according to the report.