Midlands Tight Industrial Market to Benefit from Manufacturing Growth

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1 Research & Forecast Report COLUMBIA, SC INDUSTRIAL Q Midlands Tight Industrial Market to Benefit from Manufacturing Growth Jessica Rahal Research Coordinator South Carolina Key Takeaways > > The Midlands industrial market continues to tighten and attract investments from new and existing companies. > > New construction and renovation of existing properties are on the rise. > > Sales volume is strong throughout the region. > > Manufacturing employment headed towards pre-recession levels. Market Conditions The Midlands region, comprised of Aiken, Calhoun, Clarendon, Darlington, Fairfield, Florence, Kershaw, Lee, Lexington, Newberry, Orangeburg, Richland, Saluda, and Sumter counties, is undergoing significant improvements with investments, job creation, and construction activity. The vacancy rate for the market was 8.9% at the end of the first quarter of Overall, large blocks of quality industrial space are in low supply throughout the market and tenants are oftentimes finding themselves competing for space. While building options are shrinking in the Midlands, there are many good offerings still available in the market. This should help the Midlands area attract new investment as the Upstate and Low Country struggle with very tight inventories of space. Manufacturing is improving throughout the Midlands region, adding 4,100 jobs since March 2010 and the momentum is on the upswing. 2,100 manufacturing jobs were added in 2014 alone recording an annual growth rate of 7.3%, the greatest since Factors fueling this manufacturing renaissance include increasing wage rates in China and the Pacific Rim, a stronger US economy, growth in domestic consumer spending, recovering European markets, lower energy cost and innovative manufacturing efficiencies. In 2014, South Carolina ranked 17th exporter overall in the United States with China being the nation s top exporting partner. The state ranked first for exports of tires and completed passenger motor vehicles in the United States. The presence of the Port of Charleston and South Carolina Inland Port (SCIP) in Greer is Market Indicators Relative to prior period Q Q2 2015* VACANCY NET ABSORPTION CONSTRUCTION RENTAL RATE Note: Construction is the change in Under Construction. *Projected Midlands Industrial Counties Saluda 8 Sumter 2 Newberry 9 Clarendon 3 Fairfield 10 Orangeburg 4 Kershaw11 Calhoun 5 Lee 12 Aiken 6 Darlington 13 Lexington 7 Florence 14 Richland 4 5 6

2 driving the growing success of Charleston, Greenville and South Carolina as a whole. Container volume is up at the Port of Charleston, which handled 152,926 twenty-foot equivalent units (TEUs) in February 2015, 17.9% more than the previous year. SCIP, operational since November 2013, is far exceeding expectations, moving over 42,000 containers in The Midlands central location between the Port of Charleston and SCIP offers a competitive advantage for the region, which offers a growing talented labor force, efficient logistics and tax incentives. While occupancy is high in the market, several quality industrial buildings have the potential to draw new companies to the area. Northeast Columbia is home to a unique 465,000 square foot Class A facility on 100 acres. The facility is currently home to BOSE, which recently announced plans to close its operations at the site. Upon BOSE vacating the building in September, the submarket will offer a one-of-a kind facility as there are currently no comparable buildings available for lease in the entire state. The building, expandable to one million square feet, has the potential to attract a major employer to the market, which depending on the type of user, may motivate the entry of suppliers and new manufacturers to the area. New Development With rental rates increasing and the supply of available quality space running low, the market is welcoming its first wave of build-to-suit and speculative construction. A challenge often faced by new construction is the high rental rates and long-term lease required for new industrial space. As rental rates continue to increase, the gap between rental rates required for new space and current market rental rates will diminish, making construction a feasible option for many tenants. > > Sigmatex, world leader in the manufacturing of carbon fiber textiles, broke ground in January 2015 on a new 75,000 square-foot facility. The building will be the first in John W. Matthews, Jr. Industrial Park. Sigmatex s $12 million investment is expected to create 50 jobs over the next five years. > > Two Class A speculative industrial buildings, 70,000 square feet and 62,500 square feet, remain under construction at Shop Grove Industrial Park in Richland County. Party Reflections pre-leased 42,000 square feet in the 62,500 square-foot building. T&C Metals pre-leased 35,000 square feet of the 70,000 square-foot speculative building. > > Lexington County is working with Landmark Builders to develop a 120,000 square-foot speculative industrial building in Saxe Gotha Industrial Park. Manufacturing Employment Growth Manufacturing Jobs (Thousands) Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Manufacturing Employment Source: Bureau of Labor Statistics Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Annual Percent Growth Shop Grove Industrial Park Spec Building Rendering Jan-14 Jul-14 Jan % 5.0% 0.0% -5.0% -10.0% -15.0% Lexington County Spec Building Rendering Successful pre-leasing of the speculative buildings is likely to spur further speculative development as the market vacancy rate continues to decline. Source: Landmark Builders 2 South Carolina Research & Forecast Report Q Columbia Industrial Colliers International

3 Q Industrial Market Summary Statistics Midlands, SC* MARKET BUILDINGS INVENTORY DIRECT VACANT SUBLEASE VACANT TOTAL VACANT TOTAL VACANCY RATE (%) Q ABSORPTION INDUSTRIAL MARKET Cayce/West Columbia 90 6,712, , , % -140,200 Columbia CBD 83 2,461,405 99, , % 59,750 East Columbia 56 1,970,207 23, , % 0 Irmo/Chapin , % 0 Lexington 35 4,241, % 0 North Columbia 59 1,935, , , % -11,330 Northeast Columbia 45 5,408, , , , % 0 Northwest Columbia ,404 10, , % 3,900 Southeast Columbia 182 7,484, ,090 38, , % 125,467 Aiken County 56 10,547, , , % 134,000 Calhoun County 6 402,644 11, , % 0 Clarendon County 8 670, , , % 0 Darlington County 20 3,548, ,000 57, , % 0 Fairfield County 13 1,545, , , % 126,660 Florence County 105 7,845,947 1,022, ,022, % -20,000 Kershaw County 34 5,253, , , % 0 Lee County 8 823, , , % 0 Newberry County 12 1,889, , , % 0 Orangeburg County 69 6,922, ,129 86, , % 40,500 Saluda County 5 551, , , % 0 Sumter County 51 4,991, , , % -67,150 Market Total ,718,307 6,419, ,418 6,800, % 251,597 Source: Colliers International Research, CoStar *Colliers International s tracked inventory for the Columbia, SC industrial market was reassessed during Q and expanded to include a total of fourteen counties versus the previously tracked two counties of Richland and Lexington counties. Recent Sales Investments & Expansions Sales activity remains healthy throughout the market given the current low interest rates, high occupancy and top rental rates. > > Reger Holdings expanded their South Carolina portfolio with the acquisition of three properties totaling $10.4 million. The properties acquired were in Gaffney, Bishopville and Columbia Atlas Road in Columbia, a 35-acre industrial complex consisting of 7 buildings with a total size of 230,000 square feet, was acquired for $4.8 million. 225 Browntown Road, a 117,000 square-foot industrial facility in Bishopville was acquired for $2.3 million. Reger Holdings portfolio consists of 3.8 million square foot in 29 buildings across 13 counties in South Carolina. > > The 41,624 square-foot industrial facility at 2413 Leaphart Road in Cayce was acquired for $1 million early in The facility has easy access to I-26, I-77 and major thoroughfares through Lexington and Richland counties. Announcements of new investment and expansion continue to make headlines throughout the market. > > Brazil-based Inbra Industrias Quimicas, Ltda., producer of plastics and rubber additives, plans to open a new manufacturing plant in Orangeburg County. The plant will be the manufacturer s first site in the United States. The $7.7 million investment is expected to create 14 new jobs and be operational by mid-year > > Red Bone Alley Foods, LLC is investing $3.5 million in expanding its Florence County operations. The expansion will allow the establishment of a new manufacturing operation and create 45 new jobs. > > Wire Mesh Companies, a manufacturer of high-quality welded wire products, plans to invest $13.9 million to open a new manufacturing facility in Calhoun County. The company acquired a 143,000 square-foot facility for its new operations. Sources: Bureau of Labor Statistics, Colliers International Research, CoStar, Orangeburg County Development Commission, South Carolina Department of Commerce, South Carolina Ports Authority, St. Louis Federal Reserve, United States Census Bureau 3 South Carolina Research & Forecast Report Q Columbia Industrial Colliers International

4 Market Outlook The vacancy rate is expected to further decline with rental rates increasing as landlords reap the benefits of a highly occupied market. Speculative industrial construction will gain momentum upon successful leasing of current projects. Build-to-suits are likely as prospective tenants find themselves with limited options for space. Manufacturing employment is expected to grow, nearing prerecession levels and further contributing to the low vacancy rate in the market. Sales will remain strong while interest rates are still low with investors renovating and repositioning older industrial facilities. 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 Greenville, are beginning to see build-to-suit and speculative office construction. Capital investment and sales continue to grow throughout the state. North Pointe Business Campus Rendering Hillside Enterprise Park Rendering Charleston, South Carolina Activity in Charleston has been on the rise in recent years, a trend that is expected to last for a while. > > Mercedes-Benz Vans, a division of Daimler, recently announced plans to invest $500 million in a new Sprinter van plant in Charleston. Construction on the new plant is expected to begin in The manufacturer is expanding its facility at 8501 Palmetto Commerce Parkway and will use the new plant to manufacture next-generation Sprinter vans to supply the North American market. This noteworthy investment will likely attract suppliers to the region. > > MeadWestvaco is breaking ground in May on North Pointe Building C, a 350,760 square-foot cross dock building at the North Pointe Business Campus on North Rhett Avenue. Greenville, South Carolina The Upstate was first to experience a new wave of construction and continues to be home to the greatest activity with both private and public funded developments. > > Scannell Properties is set to break ground on a 155,000 squarefoot speculative facility to be located off Highway 290 in Hillside Enterprise Park. This is the first of up to six buildings ranging from 100,000 to 500,000 square feet. > > Construction is complete at White Horse Industrial Center, which is home to two new industrial facilities. The $20 million project being developed by Exeter Property Group and Burnham Partners adds 306,000 square feet of industrial space to the existing inventory with a graded building pad designed to accommodate 234,000 square feet. For more statewide commercial real estate news check out our market reports at: White Horse Industrial Center Source: Greenville Area Development Corporation 4 South Carolina Research & Forecast Report Q Columbia Industrial Colliers International

5 502 offices in 67 countries on 6 continents United States: 140 Canada: 31 Latin America: 24 Asia Pacific: 199 EMEA: 108 $2.3 billion in annual revenue 1.7 billion square feet under management 16,300 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 COLUMBIA INDUSTRIAL PROFESSIONALS: Chuck Salley, SIOR Vice President & Director of Industrial Brokerage Team Chuck.Salley@colliers.com Dave Mathews, SIOR Senior Brokerage Associate Dave.Mathews@colliers.com Sam Myers Brokerage Associate Sam.Myers@colliers.com Colliers International Columbia 1301 Gervais Street, Suite 600 Columbia, South Carolina USA About Colliers International Colliers International is a global leader in commercial real estate services, with more than 16,300 professionals operating out of 502 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 100 for 10 consecutive years, more than any other real estate services firm. colliers.com Copyright 2015 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.