Greenville, SC – Feb. 13, 2020 – Developers completed construction of 289 million sq. ft. of industrial & logistics real estate in the U.S. last year, but any concerns of oversupply are tempered, as only 39 percent of space in new construction was available. That’s a major factor in vacancies staying near all-time lows in 2019, according to a new report from CBRE. The report also states that Greenville is ranked the fourth-lowest vacancy market for 2019 construction completions in markets with over 4 million square feet of new development, with a vacancy rate of 18.7 percent.
“While speculative development is at an all-time high in the Greenville-Spartanburg market, the demand continues to meet and exceed the supply. The Greenville-Spartanburg industrial market has recorded positive absorption for 34 of the last 35 quarters, averaging 1.4 million square feet per quarter, with expectations for this trend to continue through 2020. This will continue to put downward pressure on the vacancy rates in a market that we believe is still underserved, from a long-term perspective. The market fundamentals look positive for the foreseeable future in Upstate South Carolina,” said Trey Pennington, Senior Vice President at CBRE in Greenville.
Deliveries outpaced the 255 million square feet of new absorption, but with robust leasing from occupiers, especially ecommerce and retail firms that often require modern building design and amenities, supply and demand dynamics remain healthy. A vacancy rate of less than 50 percent is considered healthy for newly delivered industrial properties.
“With national vacancy at 4.4 percent is was becoming difficult for occupiers to find modern space,” said James Breeze, CBRE Global Head of Industrial & Logistics Research. “This new supply is needed and will keep transaction activity strong, especially for larger deals. The robust activity in newly constructed product also warrants the large amount of ground breakings we continue to see.”
Another major factor contributing to the strong absorption of new construction is the increase in built-to-suit development—the construction of space for a specific space user. This segment made up 28.1 percent of new construction activity, as companies increasingly need unique requirements to meet their specific demands.
In markets with over 4 million square feet of new development, Kansas City finished 2019 with the lowest overall vacancy rate for 2019 construction completions at 7.3 percent, followed by Miami, Baltimore, and Greenville, SC, which all had vacancy rates for newly constructed product under 20 percent. Dallas-Fort Worth was the strongest core market, with nearly 75 percent of the 25 million square feet completed in 2019 taken.
Supply fundamentals should remain stable this year, as already 33 percent of the 309 million square feet under construction nationwide is already accounted for. A preleasing rate of 25 percent for under-construction product typically are indicative of a solid leasing environment.
“With pre-leasing robust for under construction projects, the overall vacancy rate is expected to remain in check in the foreseeable future,” said Breeze.
5 Lowest Vacancy Markets for Over 4 MSF of Completions
Market 2019 Completions Vacancy Rate
Kansas City 4.4 7.3%
Miami 5.0 12.4%
Baltimore 7.4 13.0%
Greenville 4.2 18.7%
New Jersey (Central & Northern) 6.3 22.2%
Top 5 Submarkets with Significant Development Activity
Market Submarket Total Under Construction Market Total Under Construction
North Fort Worth 12.0 23.5
South Atlanta 9.6 22.1
Northeast Atlanta 6.0 22.1
Ontario, Calif. 5.0 19.1
Southeast Houston 4.7 17.7
To download the report, click here.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2018 revenue). The company has more than 90,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 480 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
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