Columbia Industrial Figures Q3 2023

Leasing Activity

Leasing activity was comprised of nine new leases, two renewals, one sublease and one lease option totaling 283,689 sq. ft., nearly half of the transactions were over under 10,000 sq. ft. The vacancy rate is 2.4%; therefore, there are few options in the market for direct deals. However, sublease space is being leased each quarter which, even though not reflected in absorption numbers, helps in balancing the market. During the third quarter of 2023 the Columbia industrial market posted 947,481 sq. ft. net absorption.

 

Pricing and Availability*

The third quarter of 2023 saw a stable average direct asking rate in the Columbia MSA at $5.08 per square foot per annum. The Dutch Fork submarket had the highest rate at $8.38 per square foot per annum on a triple net basis. The Cayce/West Columbia submarket followed with $6.07 per sq. ft. per annum. Other submarket pricing varied from $3.25 per sq. ft. in Fairfield County to $5.87 per sq. ft. in Northeast Columbia.

 

Development Activity

There are four buildings under construction in the Columbia industrial market totaling approximately 867,140 sq. ft. in the Lexington and Southeast Columbia submarkets. Four buildings delivered this quarter to the Columbia market adding over 1-million sq. ft. this quarter. In addition, there were four industrial warehouses delivered in outlying markets year-to-date within Florence, Pageland and Sumter totaling 423,620 sq. ft.

 

Capital Markets

The third quarter of 2023 saw steady property sales, despite a potential minor recession and slower transactions compared to previous years. Five properties were sold, the largest of which was a 350,000 sq. ft. building in the Lexington submarket. The average sale size was 107,889 sq. ft. The Columbia industrial market, a target industrial-user market in the Southeast, maintains a stronger investment interest position than other tertiary markets nationwide due to key long-term market fundamentals. The addition of Scout is expected to further drive the interest of supporting manufacturing and logistics companies in the capital market in the upcoming years.

 

Employment and Economic Outlook

The U.S. economy has demonstrated resilience despite stringent credit conditions and banking sector write-downs, largely due to the impact of the Chips and IRA Acts on the construction sector, Federal Reserve and FDIC's support to banks, and strong consumer balance sheets and incomes. However, challenges such as rising oil prices, the resumption of student loan payments, and a weakening global economy are emerging in the face of high-interest rates. The Federal Reserve's predicted end to its tightening cycle could benefit real estate capital markets. Although economic growth may slow down, valuations are expected to stabilize by the first half of 2024. The Midlands region may face additional stressors like increasing sublease space and lease give-backs but this creates opportunities for new companies due to the availability of larger blocks of space which are currently non-existent.

 

*Disclaimer: Average rental rates may be lower than current actual deal strike rates. Many higher quality rental rates are undisclosed and lower quality building rental rates are skewing the overall average lower than actual market rates.