Efficient Logistics to Drive Warehouse and Distribution Growth in the Upstate

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1 Research & Forecast Report GREENVILLE, SC INDUSTRIAL Q 05 Efficient Logistics to Drive Warehouse and Distribution Growth in the Upstate Jessica Rahal Research Coordinator South Carolina Key Takeaways > > The Upstate, SC industrial market continues to grow and improve, attracting distribution centers and logistics providers to the region. > > Rental rates continue to inch upwards with declining vacancy rates. > > Investments continue to flow into the region. > > Area Development Magazine ranked South Carolina the # State for Doing Business in 05. Location and Accessibility Attract Distribution Centers As transportation costs continue to make up a growing portion of a company s total operating costs, distribution centers and manufacturers are showing greater interest in a site s location and accessibility to other markets. The Upstate has received significant attention from several distribution centers and third-party logistics providers, attracting investments from Techtronic Industries, Dollar Tree, Rite Aid and Kenco Logistics Services over the past year. The Interstate 85 (I-85) corridor runs through the region, connecting it to major markets such as Charlotte, NC and Atlanta, GA, among others. The Upstate is a.5-hour drive to the Port of Charleston, which is also accessible via Norfolk Southern Rail and the South Carolina Inland Port. Traditionally, the Upstate s distribution centers catered to the automotive and textile clusters. Today, however, the region is welcoming distribution centers for a wide array of sectors including consumer products such as beverage, food storage, pharmaceuticals and clothing. A strong demand exists for large box distribution space throughout the market. Speculative construction and build-to-suit construction are on the rise in response to the growing demand. Approximately 4.8 million square feet of industrial space are under construction in the market with build-to-suits accounting for.7 million square feet of that space. Techtronic Industries (TTi) selected Anderson County for its new. million square-foot light assembly and distribution facility after surveying sites across four states. TTi is investing $85 million and expects to create more than 00 new jobs. The build-to-suit facility is currently under construction at the intersection of I-85 and Highway 8 and is expected to complete by mid-year 06. Market Indicators Relative to prior period Q 05 Q4 05* VACANCY NET ABSORPTION CONSTRUCTION RENTAL RATE Note: Construction is the change in Under Construction. *Projected Summary Statistics Q 05 Greenville Industrial Market Market Industrial Flex Vacancy Rate 7.6% 7.5% 9.% Change From Q 05 (basis points) Absorption (Thousand Square Feet) Under Construction (Million Square Feet) Industrial Asking Rents NNN Market $.4 Greenville $.45 Spartanburg $ ,

2 Greenville is Connected Charlotte Atlanta UPSTATE COUNTIES: Greenville Anderson Pickens Laurens Spartanburg Cherokee Access to and from Greenville: INTERSTATE: I-85 I-6 I-85 AIR: Greenville-Spartanburg International Airport (GSP) RAIL: CSX Norfolk Southern PORTS: Port of Charleston SC Inland Port (Greer) Dollar Tree announced plans earlier this year to invest $04.4 million in a new,.5 million square-foot distribution center to be built at the Cherokee and Spartanburg counties border in Upstate Corporate Park. The company plans to begin operations in 06 and hire 400 employees by 00. The presence of the South Carolina Inland Port and I-85 helped attract the company to the region. During the first quarter of 05, Rite Aid Corporation announced plans to build a 900,000 square-foot distribution center in Spartanburg County. The $90 million project is expected to create nearly 600 jobs and be fully operational in 06. The new center, which is a consolidation of three existing distribution centers, will allow improved efficiency and easy access to Southeastern markets via I-85 and other transportation methods. Interstate 85 Connects the Upstate The I-85 corridor connects the Upstate to major Southeastern markets as far as Montgomery, Alabama and directly reaches markets as north as Richmond, Virginia. The interstate also connects to a major interstate corridor, I-95, which reaches New York, 75 miles away from Greenville, SC. The I-95 corridor reaches Richmond, Washington, D.C., Baltimore, Philadelphia, New York City and Boston. As the migration from the Northeastern to Southeastern U.S. continues, the I-85 corridor will become increasingly important, adding to the Upstate s appeal. South Carolina Ports The Upstate is also connected to other markets via South Carolina s ports, the South Carolina Inland Port (SCIP) and the Port of Charleston. The Port of Charleston handled 70,58 twenty-foot equivalent units (TEUs) in August 05, a 4.0% increase over August 04. Activity at the port is on the rise over recent years and is expected to increase further upon completion of the Panama Canal expansion, which will allow the port to handle larger vessels. Activity is also strong at SCIP, which is exceeding expectations. SCIP handled 7, rail moves in August. SCIP ended its first full fiscal year of operations with 58,407 rail moves. Current users include BMW and Adidas. SCIP has the capability to grow its capacity and will likely expand to accommodate growth and demand for services. South Carolina Research & Forecast Report Q 05 Greenville Industrial Colliers International

3 Market Conditions The Greenville/Spartanburg, South Carolina market is comprised of Anderson, Cherokee, Greenville, Laurens, Pickens and Spartanburg counties. The region s combined industrial and flex market continued to tighten throughout the third quarter of 05, absorbing approximately million square feet and ending the quarter with a total vacancy rate of 7.6%. The vacancy rate is down from 8.0% at mid-year 05 and 0.% five years ago. Spartanburg and Greenville counties experienced the greatest leasing activity during the quarter, absorbing 84,70 square feet and 99,645 square feet, respectively. Highlighted Under Construction & Planned Speculative Developments 4 5 Industrial Market The market s industrial inventory continues to be absorbed as demand for space in the region grows. The third quarter of 05 ended with a total vacancy rate of 7.5% for the industrial market, down from at mid-year 05 and 9.9% five years ago. The market absorbed approximately 965,000 square feet of industrial space during the third quarter, contributing to a year-to-date net absorption of. million square feet. Asking rental rates are on the rise as quality space remains difficult to find and construction costs increase. Greenville County is home to some of the highest rental rates in the market with rental rates averaging $.45 NNN at the end of the third quarter of 05. Flex Market Activity in the Greenville/Spartanburg flex market falls behind leasing velocity and interest in the market s industrial market. Year-to-date net absorption is approximately 8,000 square feet with 64,000 square feet being absorbed during the third quarter alone. The vacancy rate for the flex market was down to 9.% at the end of the third quarter, down from 0.% at midyear 05 and 0.4% one year ago. Greenville and Spartanburg counties are home to 86.0% of the market s flex space and had vacancy rates of 0.0% and 9.0%, respectively, at the end of the third quarter of 05. Industrial & Flex Total Vacancy Rate Trends 8.0% 8.0% 7.6% 5.% 4.9% 4.6% 8.% 8.0% 7.8% 7.8% 7.8% 7.% A growth in demand for space in the Upstate s tightening industrial market has spurred speculative construction throughout the region. Approximately million square feet of speculative industrial space remain under construction. More than 650,000 square feet were recently added to the existing inventory. The majority of new speculative construction has been limited to Spartanburg and Greenville counties. Under Construction 4 5 Hillside Enterprise Park Spartanburg County Scannell Properties 55,000 SF Logue Park Greenville County Cothran Properties Building : 0,000 SF Building (Complete): 90,000 SF 00% leased by Silvercote 545 Brookshire Road Spartanburg County Beacon Partners 40,00 SF Flatwood Industrial Park Spartanburg County Johnson Development Associates 6,000 SF Wingo Park Spartanburg County Becknell Industrial 75,000 SF Recently Delivered Caliber Ridge Industrial Park Spartanburg County Liberty Property Trust 0 Caliber Ridge Drive: 56,000 SF 00% Vacant 0 Caliber Ridge Drive: 56,000 SF 0% Vacant Southchase One Greenville County Pattillo Industrial Real Estate 05,000 SF White Horse Industrial Center Greenville County Brunham Partners LLC and Exeter Property Group 06,000 SF Market Anderson Greenville Spartanburg Q-4 Q-5 Q-5 South Carolina Research & Forecast Report Q 05 Greenville Industrial Colliers International

4 Investments & Expansions As of October 05, approximately $658 million worth of capital investments were promised to the Upstate since the beginning of the calendar year. The investments will create over,00 jobs and account for more than 5 million square feet of both existing and planned industrial space. > > ZF Transmissions, global supplier of driveline and chassis technology, is expanding its transmission manufacturing plant in Laurens County. The company is investing $.5 million and creating 545 new jobs to expand its manufacturing capacity. The manufacturer and supplier acquired an existing, 50,000 square-foot facility to house its manufacturing and warehousing operations, which will be operational early in 06. > > Moderna Products, a family-owned company headquartered in Belgium, plans to open its first United States manufacturing plant in Gaffney, SC by year-end 05. The company will be locating in an existing 6,000 square-foot facility and plans to invest $6.5 million and create 5 new jobs over the next five years. The manufacturer and distributor of plastic products for pets was attracted to the region by the presence of the South Carolina Inland port, I-85 and access to I-6. > > Draxlmaier, a top automotive supplier, is expanding its existing Spartanburg County plant, investing more than $5 million and creating 94 new jobs over the next five years. The tier-one automotive supplier manufacturers interiors for premium automobiles and plastic components. The supplier is constructing a new 84,000 square-foot production and logistics facility. > > Germany-based Kirchner Konstruktionen plans to open its first U.S. facility, Kirchner Design Inc., in Greenville County. The company plans to invest more than $ million and create 0 new jobs over next five years. > > KING Automation is investing $4 million to relocate to a larger facility within Spartanburg County, creating 80 new jobs over the next five years. > > Germany-based MAIREC is establishing its first overseas operations in Spartanburg County. The recycling operations will be located in 50,800 square feet at 0 Old Converse Road, which the company leased. The $4.6 million investment is expected to create 5 new jobs. The company s customer base includes the automotive, chemical and electronics industries, among others. > > Mogul South Carolina Nonwovens Corporation, which is to be located in Laurens County will be Mogul s first North American operations. The company is investing $7.6 million and purchasing an existing 9,000 square-foot building at 00 ISO Poly Parkway in Gray Court. The facility will create 8 new jobs and be fully operational by mid-year 06. > > Aran Packaging, a company in the liquid packaging industry, plans to invest $5. million and establish its first U.S. operations in Greenville County. The company will occupy an existing building at 704 Poplar Drive and is expected to be fully operational by July 06. Approximately 6 new jobs will be created over the next five years. > > Mitsubishi Polyster Film Inc. plans to invest $00 million to expand its Greer, SC manufacturing facility in Greenville County. > > Suzhou Glacier Import & Export Co., Ltd. plans to invest $4 million and establish Cold Mountain Material Corporation in Greenville County. The China-based company will occupy a 70,000 square-foot building in Travelers Rest and expects to create 09 new jobs. Industrial Employment The Upstate region is made up of the Grenville-Anderson-Mauldin and Spartanburg, SC metropolitan statistical areas (MSA). The industrial sector, consisting of manufacturing and wholesale trade employment, reported 08,00 jobs in June 05 for the combined MSAs, gaining 900 jobs over months. Manufacturing employment accounts for 5.% of the Upstate s total nonagricultural employment and wholesale trade accounts for 4.7% of employment. Industrial Vacancy Rate Trends $ % 5.% 4.9% 4.5% 7.7% 7.7% 7.7% 7.% Market Anderson Greenville Spartanburg $.9 $.4 Q-4 Q-5 Q-5 Industrial Rental Rate Trends $.94 $.9 $.7 $.46 $.45 $. $. $.0 $.8 Market Anderson Greenville Spartanburg Q-4 Q-5 Q-5 4 South Carolina Research & Forecast Report Q 05 Greenville Industrial Colliers International

5 Q 05 Industrial Market Summary Statistics Upstate, SC MARKET INDUSTRIAL SPACE BUILDINGS INVENTORY DIRECT VACANT SUBLEASE VACANT TOTAL VACANT TOTAL VACANCY RATE (%) Q 05 ABSORPTION AVERAGE ASKING RENTAL RATE (NNN) Anderson County 69 8,57,874 89,8 0 89,8 4.9% 84,000 $.9 Cherokee County 6 5,87,08,6,486 0,6,486.6% 49,500 $.09 Greenville County,0 67,97,499 5,8,54 0 5,8,54 7.7% 84,090 $.45 Laurens County 76 0,97,0 56, ,057 5.% 76,400 $.7 Pickens County 7 4,88,949 4, ,646 7.%,700 $.6 Spartanburg County ,60,0 4,868,746 08,084 5,076,80 7.% 7,9 $. Industrial Total,467 78,0,64,55,47 08,084,6, % 964,89 $.4 FLEX SPACE Anderson County 0 497,55 7,50 0 7,50 5.5%,000 $8.5 Cherokee County 4,69,800 0, % 0 - Greenville County 07 4,795,8 478, , % 5,555 $7.69 Laurens County 8, % 0 - Pickens County 46,57 5, , % 0 - Spartanburg County 58,549,896 9,50 0 9,50 9.0% 47,04 $8.09 Flex Total 0 7,79,09 68, ,04 9.% 6,596 $7.84 MARKET TOTALS Anderson County 89 8,855,409 98,4 0 98,4 4.9% 85,000 $.6 Cherokee County 6 5,87,77,76,86 0,76,86.7% 49,500 $.09 Greenville County,7 7,766,780 5,706,84 0 5,706,84 7.8% 99,645 $.67 Laurens County 78 0,975,8 56, ,057 5.% 76,400 $.7 Pickens County 84 5,0,486 67, , %,700 $.6 Spartanburg County 97 7,809,997 5,008,49 08,084 5,6, 7.% 84,70 $.5 Market Total,768 85,58,77,88,5 08,084 4,046, %,08,45 $.4 Market Outlook The industrial market is poised for continued success through the remainder of the year and into 06. Approximately million square feet of speculative industrial space will be added to the existing inventory upon completion of several projects. The new space has already seen significant interest and is anticipated to lease quickly, alleviating some of the strong demand for space. Significant demand has the potential to support additional speculative projects. Build-to-suit construction is on the rise and will likely maintain its current momentum. Vacancy is projected to decline despite a growing inventory. Rental rates will continue to increase as vacancy remains low and construction costs increase. Efficient logistics supported by the Interstate 85 corridor, South Carolina Inland Port and Port of Charleston will continue to appeal to distributors. Annual Change in Industrial Employment by Month Combined Greenville-Anderson-Mauldin & Spartanburg, SC MSAs Number of Industrial Jobs Added,000,500,000,500, Aug-0 Dec-0 Apr- Aug- Dec- Apr- Source: Bureau of Labor Statistics, St. Louis Federal Reserve, Colliers International Aug- Dec- Apr- Aug- Dec- Apr-4 Aug-4 Dec-4 Apr-5 5 South Carolina Research & Forecast Report Q 05 Greenville Industrial Colliers International

6 Around the State A growing demand for industrial space throughout South Carolina is attributing to tightening markets and soaring rental rates, creating a need for new industrial construction. Major markets around the state, such as Charleston and Columbia, are beginning to see build-tosuit and speculative office construction. Capital investment remains strong from both domestic and foreign firms. Charleston, South Carolina > > Volvo recently broke ground on its new $500 million manufacturing facility in Berkeley County. The plant is expected to create,000 new jobs over the next 0 years. Initially, the facility is projected to have an annual production capacity of 00,000 cars. The Port of Charleston, skilled labor force and business-friendly environment helped make Volvo s location decision. The automotive manufacturer will build the S60 sedan model solely in the new Berkeley County plant. > > Construction is underway at Gerber Childrenswear s new distribution center in Berkeley County. The 477,000 square-foot facility is being developed at Foreign Trade Zone, a joint-venture of The Rockefeller Group and WestRock Land Development. > > MeadWestvaco and SunCap Property Group recently broke ground on North Pointe Building C, a 50,760 square-foot cross dock building at the North Pointe Business Campus on North Rhett Avenue. Columbia, South Carolina > > Bose will soon vacate its manufacturing plant in Northeast Columbia. The 470,000 square-foot, Class A manufacturing facliity is located on 04 acres and is expandable to one million square feet. The facility has the potential to generate substantial capital investment and job growth for the region. > > Lexington County is working with Landmark Builders to develop a 0,000 square-foot speculative industrial building in Saxe Gotha Industrial Park, which is expected to deliver by year-end 05. > > Honda of South Carolina Manufacturing Inc. recently announced plans to expand its existing Florence County operations for the addition of two new product lines. The $4 million investment is expected to create 44 new jobs. > > China-based Haier America plans to invest $7 million to expand its presence in Kershaw County. The manufacturer plans to build a 50,000 square-foot addition to its existing facility at 50 Haier Boulevard. The expansion will allow the company to grow its annual refrigerator production and expects to complete the expansion in 08. Gerber Childrenswear Under Construction North Pointe Building C Rendering Source: MWV Lexington County Spec Building For more statewide commercial real estate news check out our market reports at: 6 South Carolina Research & Forecast Report Q 05 Greenville Industrial Colliers International

7 50 offices in 67 countries on 6 continents United States: 40 Canada: Latin America: 4 Asia Pacific: 99 EMEA: 08 $. billion in annual revenue.7 billion square feet under management 6,00 professionals and staff FOR MORE INFORMATION: Liz H. McCary Director of Marketing South Carolina Liz.McCary@colliers.com Jessica D. Rahal, CPRC Research Coordinator South Carolina Jessica.Rahal@colliers.com GREENVILLE INDUSTRIAL PROFESSIONALS: Givens Stewart, SIOR Principal Givens.Stewart@colliers.com Garrett Scott Brokerage Associate Garrett.Scott@colliers.com Brockton Hall, MRED Brokerage Associate Brockton.Hall@colliers.com Richard Jackson Brokerage Associate Richard.Jackson@colliers.com Richard Barrett Brokerage Associate RO.Barrett@colliers.com Colliers International Greenville 55 E. Camperdown Way, Suite 00 Greenville, South Carolina USA About Colliers International Colliers International is a global leader in commercial real estate services, with more than 6,00 professionals operating out of 50 offices in 67 countries. A subsidiary of FirstService Corporation, Colliers International delivers a full range of services to real estate occupiers, owners and investors worldwide, including global corporate solutions, brokerage, property and asset management, hotel investment sales and consulting, valuation, consulting and appraisal services, mortgage banking and insightful research. Colliers International has been recognized and ranked by the International Association of Outsourcing Professionals Global Outsourcing 00 for 0 consecutive years, more than any other real estate services firm. colliers.com Copyright 05 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.