Columbia Retail

Anderson

Submitted by Ron Anderson, VP of Research and Technology, NAI Avant LLC in Columbia, S.C. Posted 02-22-08.

What area is your expertise?
• Columbia, S.C.

What trends do you see presently in retail development in your area?
• Currently, there are several active types of development:

• Wal-Mart and Target anchored community centers ranging from 200,000 to 300,000 square feet
• Unanchored retail strips from 6,000 to 20,000 square feet
• Auto dealerships relocated from in town to suburban locations
• Additional home improvement locations
• Bank locations
• Fast food locations

What type of retail product is doing well in your area?
• All retail seems to be quite strong at this point

Who are the active retail developers in your area?
• Active retail developers are Fletcher Bright, WRS, Edens & Avant, Kahn Development, and Owen Development.

Please name one or two significant retail developments in your area. What impact will these projects have on the market?

• Village at Sandhill is a 1 million-square-foot lifestyle center in Northeast Richland County. It is being developed by Kahn Development of Columbia. This project has introduced the lifestyle center to the region and created a retail anchor in Columbia’s fastest growing suburb.

• The Shoppes at White Knoll is a 250,000 square foot development that was recently completed in the Redbank submarket. WRS of Aiken developed it. It is significant because it has created an anchor for a new retail submarket.

Where is the majority of development taking place? Why is this area doing well?
• The majority of development is taking place in the Northeast Richland submarket. This is primarily because it is the fastest growing residential area in the region with 35 percent of all new homes constructed nearby.

What area do you expect to be the next big retail development market? Why?
• The next big retail market will be the Lower Richland market along Garners Ferry Road. This area is supported by moderate residential development.  More importantly, this area fills a niche created by the decline of the Columbia Place/Decker Boulevard retail area.

Please describe the retail leasing activity in your area.
• Retail leasing in the area is very active and has been so for the last six months.

Please give a measure of retail vacancy rates and a measure of available sublease space.
• Overall vacancy (excluding regional malls) was 8.3 percent market wide at the end of 2007. The strongest major submarkets were Irmo/Harbison (5.4 percent), Lexington (2.8 percent) and Northeast Richland (8.2 percent).

What types of retailers should look into your market in the coming year? What type of retail is needed?
• Many national restaurant chains have not entered the market but would do well here. Additionally, Costco and BJ’s are absent in the market.

Charleston Industrial

Columbia Industrial

The Midlands Multifamily

Duren

Submitted by Tracy Duren, senior broker with the Columbia, South Carolina, office of NAI Avant. Posted 8-2-06.

What area is your expertise?
• the Midlands region of South Carolina

What trends do you see presently in multifamily development in your area?
• Apartment construction and absorption are up. Since 2000, apartment absorption has been approximately 1,200 units per year. Vacancy rates are up to about 7.4 percent because of above-average levels of construction. New unit absorption has been increasing at the expense of older units, affecting Class B and C properties.

Who are the active multifamily developers in your area?
• The most active multifamily developers in our area are Davis Development, Fickling and Continental Community.

Please name one or two significant multifamily developments in your area. What impact will these projects have on the market?
• Significant multifamily developments are apartment projects: Carrington Place (location: Mallet Hill Road in northeast Columbia; developer: Davis Development) and The Villages at Polo (location: Polo Road in northeast Columbia; developer: Applegate Company). The impact of these projects will result in increased rental opportunities for the market, which is especially important with the continuing rapid growth of retail expansion in the northeast. A prolonged upswing in the Northeast market has created many new employers in both retail and service businesses, and thus a much greater demand for apartment space. Northeast apartment demand should remain on the increase, especially with several large commercial developments either underway or planned along Clemson Road and near both the Killian Road and Two Notch Road intersections.

Where is the majority of development taking place? Why is this area doing well?
• The majority of development is taking place in the northeast section due to new school construction and its top-rated school district (Richland II), continued employment growth, and increased growth of retail and commercial properties. The Northeast is the fastest-growing market in the metropolitan area. Along Clemson Road, the last 18 months have seen the fast development of the Village at Sandhills, with 765,000 square feet of retail space already opened, and with another 400,000 square feet in the development pipeline. The site also has 90 acres dedicated to office uses and another 90 acres slated for residential development.

What area do you expect to be the next big development market? Why?
• My expectation of the next big development market is downtown. Both the apartment and condo markets are receiving a lot of attention, and there is a big push for redevelopment in the Vista area between the central business district and the Congaree River.

What areas are doing well in terms of apartment leasing? Which areas are struggling with leasing?

The areas doing well are:

• Northeast — Clemson, Two Notch Road and Interstate 20
• Northwest — Interstate 26 and Harbison

Areas performing below average include:

• Cayce
• West Columbia
• South Congaree

Please give a measure of apartment vacancy rates.
• Columbia occupancy rates are in the range of 90 to 93 percent.

Please give a measure of condo sales activity in the area.
• The downtown area is active with conversions as well as ground-up, high-end condo development. In downtown, the live/work condos have also attracted considerable positive attention. Investors appear to be driving a significant part of the market.

What impact do current interest rates have on the apartment and condo markets? What predictions do you have for interest rates and their effect on the multifamily market in 2006?
• Increased interest rates may slow condo sales but will fuel the interest for tenants to look for apartments as housing affordability decreases. Columbia's apartment market should continue to be strong through 2006 and into 2007.

What is the status of job growth/(un)employment rates and what bearing will it have on the multifamily market?
• Job growth continues to rise, although at modest rates, and this will be the key factor that will determine the apartment community's ability to maintain current absorption rates.

Charleston Office

Hinshaw

Submitted by Kim Hinshaw, broker associate with the Charleston, South Carolina, office of Anchor Commercial/CORFAC International. Posted on 07/23/07.

What area is your expertise?
• I specialize in the Charleston S.C., market and surrounding areas.

What trends do you see presently in office development in your area?
• The office development trend right now is buildings roughly in the 10,000- to 20,000-square-foot range built as office condos (for sale) in all sectors of the metropolitan area. Medical office condos are especially popular as the physicians and medical practitioners understand the benefit of ownership when their practice has been established and the interest rates are below 7 percent. Charleston is a market that does not do much speculative office development. There has been one 100,000-square-foot office building that was built (pure spec) last year.

Who are the active office developers in your area?
• Miller-Valentine Group, Vanguard Development Group, Design Build Corp., and Trident Construction Co. are all active in our area.

Please name one or two significant office developments in your area. What impact will these projects have on the market?

Ashley Overlook
This newly completed 100,000-square-foot, four-story speculative office building is located in North Charleston just off Interstate 526. Developed and owned by Holder Properties, Ashley Overlook had a significant impact on the office market as there were no other Class A buildings that had a 25,000-square-foot floorplate at the time of completion. It gave way for two large tenants to move in from a Class B office space and have their operations on one floor. Class B space vacancy rates increased in the North Charleston area by an additional 4 percent because of the two large tenants vacating. At the same time, there was an additional 60,000-square-foot Class A space being built in a 5-mile radius of the building that was competing for the same prospective tenants.

Portside Center Office Condominiums

This newly completed 36,000-square-foot, Class A office building is ready for buyer or tenant up fit, and features steel frame and concrete floor construction. The building is visible from I-526 and is minutes from downtown, Mt. Pleasant and North Charleston. The exterior is brick, prairie stone, and tempered glass. This facility is owned by a group of local investors, Portside Center, LLC, and was developed by Mashburn Construction Co. This development, although beautifully designed with a lot of architectural appeal, has suffered from overbuilding and slow leasing in the general area. Within a 3-mile radius in the same timeframe, there has been an additional 100,000 square feet of office product for sale or lease of which only 50 to 60 percent has been absorbed. With the amount of available space in the area as of today, the rental rates and sales price have been slowing, decreasing the appeal to the handful of prospects in the area.

Offices at Belle Hall

This 73,144-square-foot property has completed construction of Building I and Building II is currently under construction. The Class A office building is only for lease, not for sale. The exterior features a structural steel frame with masonry and hard coat stucco with glass exterior construction. The building is located within the Belle Hall mixed-use development in the southeast quadrant of Mt. Pleasant off I-526, minutes from downtown and North Charleston. This facility is owned by Offices at Belle Hall, LLC, and is being developed by Choate Construction. Phase I is currently 50 percent leased and Phase II is 100 percent available. Again, this is in the same area as Portside Center just recently constructed, which is a part of the 100,000 square feet of product within a 3-mile radius. The rental rates on this project have remained stable and $18.00 NNN.

Where is the majority of development taking place? Why is this area doing well?
• A significant portion of new development office product is being constructed in Mt. Pleasant and on Daniel Island. The areas around the hospitals are being rapidly developed as off-campus medical parks for the growing demand of doctors who desire to own their own space. Both Mt. Pleasant and Daniel Island are very populated, affluent areas with ease to I-526, which makes getting downtown and to other outlying municipalities very quick and easy. To those people who do a lot of business downtown and do not want to be in the congestion of downtown, it makes for a great alternative office location.

What area do you expect to be the next big development market? Why?
• I think we will continue to see Daniel Island developing its office presence, as well as in and around the Centre Pointe area in North Charleston. Development also will continue in the Faber area of North Charleston, which is three miles from Centre Pointe and Mt. Pleasant. It will continue to grow, but the available square-footage will need to be absorbed before any other significant developments take place in that area. Daniel Island already has 40,000 square feet to 50,000 square feet of speculative product on the books and there has not been a slowdown in construction in general on the island during the last 4 years. The Faber area has two more speculative buildings planned totaling 120,000 square feet. When the leasing market becomes stronger, those developments will come to light.

What areas are doing well in terms of office leasing? Which areas are struggling with office leasing?
• Leasing is a little slow in all areas of the city with the exception of medical office leasing, which seems to be sustaining the absorption of available space coming on line mostly due to medical practices purchasing office condos.

Please give a measure of office vacancy rates and a measure of available sublease space.

Office Market	Total  SF	Available SF	Sublet	Avg. Rental Rate	Vacancy Rate	Proposed SF
West Ashley	975,642	148,232	0	$17.88	15.19%	62,000
North Charleston	3,581,235	398,265	0	$17.21	11.12%	565,000
Mount Pleasant	2,262,235	305,621	17,660	$21.62	13.51%	859,000
Downtown	2,086,320	156,226	2,364	$23.80	7.49%	287,160
Total Market SF	8,905,432	1,008,344	20,024	$20.13	11.83%	1,773,160

What impact do current interest rates have on the office market? What predictions do you have for interest rates and their effect on the office market in the next year?
• Although there is an abundant pool of lenders to choose from with a lot of financing options, in the general population over the last 2 years interest rates have risen about two points. The most increase has been over the last 12 months. This has created a generalized slow down in the office market as it relates to the purchasing of office condos. Sales activity is still more prevalent than the leasing market, but I see a shift over the next 12 months of a portion of the sales activity being driven back into the leasing market, as the rates will not be sustainable.

What is the status of job growth/(un)employment rates and what bearing will it have on the office market?
• The latest set of predictions call for most local business indicators to continue moving in the right direction, thanks in part to healthy tourism and job trends with home sales and airport traffic to be the key exceptions to this. Overall, no big surprises are expected. More likely, the upcoming quarter will be marked by the steady, but unglamorous growth, which has come to define the region’s economy. Charleston has been historically protected from economic cycles and will affect the local office market positively with the continued growth. Looking ahead, the job market in Charleston is on track to remain one of the strongest in the state. According to the chamber forecast, the first quarter unemployment rate dropped a hair to 5.1 percent. Some of the tightening is attributed to an estimated 2,000 new jobs courtesy of a few key developments, including DaimlerChrysler’s new van plant in North Charleston and the construction of American LaFrance’s new assembly plant near Jedburg.

Is there any type of office tenant absorbing a majority of space? What industries do you expect to expand in the next year to absorb a great deal of office space? What areas will be affected?
• There have a handful of industry types absorbing the majority of office space in the recent past such as small campus and technical colleges, medical practices merging and opening up new centralized locations and a majority of homebuilders that flooded the market over the last couple of years. I see other professional businesses expanding and/or relocating in the next year affecting the outlying areas of the central business district.

Columbia Office

Lockwood

Submitted by David C. Lockwood, senior vice president with the Columbia office of Colliers Keenan Inc. Posted 08/24/07.

What area is your expertise?
• I specialize in the office market in Columbia, S.C.

What trends do you see presently in office development in your area?
• There is limited new construction taking place in the market. The new construction is concentrated in three areas:  small office condominium development, limited office stock development (that which is occurring is substantially leased) and development related to the Innovista project at the University of South Carolina (USC).

Who are the active office developers in your area?
• The most recent significant office developments that occurred in the market were developed in the CBD by Holder Properties totaling 350,000 square feet and the Miller -Valentine Group’s suburban office building at 76,000 square feet.

Please name one or two significant office developments in your area. What impact will these projects have on the market?
• The two projects which will attract significant attention are both located in Columbia’s CBD. Craig Davis Properties in cooperation with USC, is developing the Horizon Center, a 100,000-square-foot office building located on the USC campus. The project is a component of Innovista, a multi-year, multi-phase research-based project initiated by USC. The Horizon Building will be completed during first quarter 2008.

Center Vista

 

Miller -Valentine Group is currently developing plans for Center Vista, a 90,000-square-foot mixed-use project located in the heart of Columbia’s Vista. The proposed building will offer office and retail space for sale or for lease with completion scheduled for late 2008.

 

Where is the majority of development taking place? Why is this area doing well?
• As evidenced by the development of two projects within close proximity to the USC and the State Capitol, there is a proactive development market capitalizing on many public dollars being spent to improve the quality of life in Columbia’s central business district. A new convention center and hotel along with continued expansion by USC and the City of Columbia’s initiatives to improve street appearances and provide parking for new development, are leading the way to lure residents, retail and office users to the area. 

What area do you expect to be the next big development market? Why?
• The northeastern Columbia suburban market is poised for continued growth as this market is experiencing the greatest increase in new housing starts and in retail development. The vast northeastern market has ample land for future growth with a well-defined interstate system. The northeast is developing into a mini city in itself, which is self-sustaining and will provide the foundation for the office sector to grow.

What areas are doing well in terms of office leasing? Which areas are struggling with office leasing?
• The northeast Columbia market and the CBD have experienced the greatest amount of lease activity during the three most recent quarters. Other suburban markets have held their ground but growth has slowed.  Given the fact that there is limited new construction taking place in the suburbs, I would anticipate a gradual strengthening of each suburban market that possesses vacant Class A space.

Please give a measure of office vacancy rates and a measure of available sublease space.
• The office market in Columbia has continually tightened during the past several years, with vacancy rates decreasing from 21.1 percent in 2004 to 14.9 percent as of March 31, 2007. The Class A market, which experienced 100,000 square feet of absorption in the first 3 months of the year, posted an even tighter vacancy rate of 12.2 percent. This level of activity has spurred new speculative development, particularly in the CBD, which is even more robust with a Class A vacancy of 10.5 percent.

What impact do current interest rates have on the office market? What predictions do you have for interest rates and their effect on the office market in the next year? 
• The combination of less than desired rent growth, higher construction costs and the rise in interest rates have collectively contributed to constraints on new development allowing the office market to continue to strengthen. The recent rise in the 10-year treasury rate will have a negative impact on the office investment market in Columbia as few properties may actually sell due the this increase.

What is the status of job growth/(un)employment rates and what bearing will it have on the office market?
• The unemployment rate in Columbia currently stands at 4.7 percent, down from 5.1 percent just 1 year ago. The area has recently experienced an increase in population as people have relocated from other parts of the country. This influx caused a short-term divergence between job growth and labor market growth, resulting in a higher unemployment rate. This has been subdued, as major national tenants have started to open facilities in the Columbia market, resulting in a stabilized correction between job growth and population growth.

Is there any type of office tenant absorbing a majority of space? What industries do you expect to expand in the next year to absorb a great deal of office space? What areas will be affected? 
• With the expansion of the USC research campus, there is a growing presence of insurance software companies locating and growing in Columbia. Columbia is now beginning to market itself as an “insurance software cluster” to attract additional companies. The market has also experienced an increase in companies who perform outsourced work for state government.