Emerging Industrial Markets: Charleston, South Carolina

Demographics

More than 2.4 million people live within 100 miles of Charleston, with a projected growth rate of 1.4% over the next five years. The important 18-to-34 age group accounts for 20.2% of the total population. Within 250 miles, occupiers can reach 21.2 million consumers.

The Charleston metro area has a warehouse/distribution labor force of 13,475, which is forecast to grow by 9% over the next decade, according to CBRE Labor Analytics. The average hourly wage for a non-supervisory warehouse worker is $16.09, which is 3.5% below the national average of $16.68; however, depending on varying industrial warehouse positions, reported average hourly pay can range between $14.50 and $17.85 per hour.

Location Incentives

Over the past five years, there have been 30 economic incentive deals totaling nearly $30 million at an average of $3,761 per new job in the Charleston metropolitan area, as reported by WAVTEQ.

According to CBRE’s Location Incentives Group, among the top incentive programs offered in Metro Charleston is the Jobs Tax Credit, which rewards businesses for creating and maintaining jobs in South Carolina. To qualify, companies must create at least 10 new jobs at a corporate headquarters, manufacturing, distribution, processing, warehousing, agribusiness or R&D facility. The non-refundable income tax credit totals between $1,500 and $25,000 per job each year for five years based on the number of jobs created and the county where the project is located.

Logistics Drivers

Charleston, the largest city in South Carolina, has witnessed strong warehouse and industrial activity in 2022, reporting record high year-to-date net absorption of over 5.7 million sq. ft. A multi-national discount retailer occupied 3 million sq. ft. in a newly constructed distribution center earlier this year. One of the top 10 container ports in the United States, the Port of Charleston is a main driver bringing top occupiers to this market. The port handled near 2.8 million TEU (twenty-foot equivalent unit) containers in 2021, an all-time high, as well as a 38% increase in volume from five years ago. Due to more goods flowing into the region, the port made improvements to accommodate the increase in container traffic. In early 2020, SC Ports opened the Hugh K. Leatherman Terminal, the country’s first new container terminal in over a decade, which can handle an additional 700,000 TEUs annually. Industries, including Volvo’s 2.3 million-sq.-ft. sole North American manufacturing facility and Mercedes Benz’ 1 million-sq.-ft. Sprinter plant (both opened in 2018). Boeing’s production of the 787 Dreamliner takes place at its 642,000-sq.-ft. assembly facility in North Charleston (built in 2011).

The region’s air-cargo facilities also attract occupiers and investors to the area. Charleston International Airport, approximately 12 miles northwest of downtown Charleston, services the city, while Greenville Spartanburg International Airport is just over a three-hour drive northwest of downtown Charleston. Greenville Spartanburg International is the 50th largest cargo airport in the U.S., which handled more than 658 million pounds of cargo in 2021.* Interstate 26 is Charleston’s main highway that spans 305 miles to Kingsport, Tennessee, allowing for efficient transport of industrial goods efficiently throughout the Southeast. With a growing population and robust transportation interconnectivity, Charleston is a top opportunistic emerging market.
*Source: FAA

Supply & Demand

While Charleston is smaller than other U.S. industrial markets, it contains approximately 72.5 million sq. ft. of inventory, and its building base has increased by 31.4% in the last five years. Charleston falls just below Hartford, Connecticut (76.7 million sq. ft.), yet above El Paso, Texas (63.2 million sq. ft.). Charleston is comprised of seven industrial submarkets with the bulk of product located in its North Charleston/Ladson submarket (27.1 million sq. ft.) As of Q2 2022, the market’s vacancy rate stood at 0.5% with total year-to-date net absorption climbing to nearly 6 million sq. ft. Industrial inventory greater than 500,000 sq. ft. is the most abundant size, accounting for approximately 30% of all industrial product in the area.

Speculative construction has increased significantly in the last year. The market reported 7.35 million sq. ft. of development, with 6.5 million sq. ft. being built on a speculative basis, the most Charleston has ever witnessed. Preleasing activity on newly delivered space has increased rapidly in 2022. Average asking rental rates have increased by over 30% in the last five years to $7.41/sq. ft./nnn. Demand for ios (industrial outdoor storage), trailer parking and transloading availability has been on the rise as occupier container stacking needs have grown. Charleston’s growth rate stood at 8.2%* by the end of Q2 2022, and the region remains extremely valuable for industrial investors and occupiers.
*CBRE calculated figure taking a market’s YTD net absorption total divided by its existing inventory amount