Columbia Industrial Figures Q4 2024

Leasing Activity and Absorption

Since 2019 deal size was dictated by the shifting economic climate in response to logistic and manufacturing needs and it became the benchmark year for deal activity comparisons following Covid-19 pandemic. In 2022, the benchmark was surpassed with 68.5% more lease activity than 2019 and boosting the need for the 1.2-million sq. ft. wave of new deliveries in 2023, which were rapidly absorbed. Deal momentum has continued at a steady pace; 2024 posted 1.5-million sq. ft. in lease velocity. Average deal size steadily increased in all size tranches from 2019 through 2024, except big box (over 250K sq. ft.), which peaked in 2022. In Q4 2024, the market posted 357,385 sq. ft. of direct net absorption with the Southeast Columbia submarket leading the way due to a new lease by Jushi USA for 200,949 sq. ft. at Pineview Trade Center.

Pricing and Availability

Average asking rental rates vary significantly by submarket, building size, and type. In the smaller Dutch Fork submarket, with predominantly flex rental rates, the overall average is $8.63 per sq. ft., while the larger Northeast and Southeast Columbia submarkets have average rental rates of $6.60 and $5.85 per sq. ft., respectively. Overall, the market rental rate has increased to an average of $5.79 per sq. ft., nearly 19% higher than Q4 of 2023. Warehouse rental rates average sq. ft. $5.74 per sq. ft., manufacturing at $5.47 per sq. ft., and flex/R&D at $8.63 per sq. ft.

Sale Activity

The Columbia industrial sale sector saw increased transaction volume, but less square feet sold, to end the year indicative of ongoing industrial pricing increases. Sale activity has been positive in consecutive quarters due to expanded lending and increased investor confidence ahead of anticipated additional interest rate cuts. In Q4 2024, there were 9 property sales, in buildings over 10K sq. ft., totaling 434,575 square feet with $54.8-million in sales volume. Owner-users purchased 274,233 sq. ft., or 63% of the total sale volume in Q4 2024. Due to anticipated loosened lending restrictions and portfolio restructuring, Columbia is likely to continue to see increases in industrial sales in 2025.

Development Activity

The Columbia industrial market has seen a slowdown in new construction completions as projects initiated in 2020 and early 2021 concluded in 2023. This completion surge led to a temporary rise in vacant industrial space, which was quickly absorbed, indicating a significant demand increase anticipated for 2025. This quarter two new buildings totaling 736,792 sq. ft. were delivered, causing a brief increase in vacancy rates. However, with a vacancy rate below 5%, additional new construction will be necessary by 2025 to meet the growing tenant demand in the Midlands. There are currently 649,140 sq. ft. under construction in the Northeast Columbia submarket.

Outlook

The U.S. economy's strong performance is mirrored in the Columbia industrial market ongoing manufacturing and warehouse demand. This economic vigor, combined with Federal Reserve rate cuts, albeit less than was previously anticipated, has significantly boosted the commercial real estate sector, particularly in the second half of 2024. Real estate capital markets have also shown progress with tightening lending spreads and rising credit issuance. Despite national economic uncertainties during an election year, the local market remains robust, buoyed by previously stalled deals now closing. This strong market appeal and solid fundamentals are likely to sustain activity into the next year, potentially leading to additional construction in 2025 to meet the demand and address space shortages.