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Veteran Opinions Upstate commercial real estate leaders talk land, industrial, retail and office By Sherry Jackson | staff | sjackson@communityjournals.com
In our first commercial real estate-themed issue of 2014, the Upstate Business Journal reached out to four industry veterans to get their takes on the current state of the Upstate industrial, retail, office and land commercial real estate markets.
L AND OUR EXPERT: JUSTIN HIRSCH, SENIOR ASSOCIATE AT CBRE THE FURMAN COMPANY
Where is the activity as far as land goes in the Upstate? Are there large blocks available? What are the submarket areas? The majority of land sales activity in the Upstate right now is in the residential development arena. Both single-family subdivisions and multifamily (apartment) communities have seen a major comeback since the economic collapse of five or six years ago. Acquisition and development financing is still a challenge for single-family residential developers. But I understand that several lenders are getting back into the A&D loan business, which will hopefully allow us to meet new housing demand in our area. Experienced multifamily developers are not having any trouble financing quality projects right now. Commercial development activity is lagging behind residential, but it also seems to be on the upswing. There are still large tracts of land
available for development, but the prime sites are becoming more scarce. There are very few sites currently available that have all of their development entitlements in place (zoning, utilities, design approval, etc.). This means that most sellers will have to be more patient with contract timelines, so that developers can get their entitlements in hand prior to closing.
What are the rates like for land values? Are they higher or lower? Are they expected to rise? Land values have seemed to stabilize over the last couple of years, after some rapid decline in values from 2008-2010. You could even make the case that land values are actually rising now, just at a slower, more sustainable rate than we saw in the early to mid-2000s. As residential and commercial development activity continues to pick up over the next several years, I could see a steady increase in land values.
What kinds of concessions are being given right now? Landowners with good infill property are not having to concede much of anything in their contract negotiations right now. There is strong demand for quality infill sites, so if the first buyer doesn’t want to pay a seller’s price, that seller can just move on to the next buyer in line. For other, more suburban sites, with a lot of competing land around them, sellers probably won’t be able to get the price they were offered years ago. And they will probably have to agree to give the buyer a longer contract period, so they can have ample time to get the entitlements and run the development analysis that they need.
18 UPSTATE BUSINESS JOURNAL
January 31, 2014
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OFFICE OUR EXPERT: DAVID FEILD, PRESIDENT, COLLIERS INTERNATIONALGREENVILLE
Where is the activity in commercial office space? Are there large blocks available? What are the submarket areas? There is significant office activity in both the Central Business District and the Suburban Submarket. Greenville’s CBD absorbed approximately 38,000 square feet of office space during the fourth quarter of 2013. The CBD continued to receive attention through the fourth quarter with several announcements of hotels and multifamily projects. The development of hotels and apartments in the CBD combined with new retailers and restaurants entering the market will provide strength to our office market. A vibrant downtown and healthy economic environment is attractive to tenants looking for office space. The suburban office market saw a significant uptick in sales activity. Large, contiguous amounts of available office space are still available, although absorption is trending up and we expect this trend to continue. It should be noted that in both the CBD and Suburban markets the number of available large blocks of Class A office space is fewer than those of Class B or C. The Greenville Area Development Corporation announced plans to increase its focus on engineering, finance and information technology firms, which are already strong and present in our region. Successful recruitment of firms in these sectors will be beneficial to the area office market as these are primarily office using firms.
What are the rates like for vacancies and occupancies? Are
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they higher or lower? Are they expected to rise? The Greenville office market ended the fourth quarter of 2013 with a lower total vacancy rate and with positive absorption. The total vacancy rate for the market dropped to 17.95 percent at the end of the fourth quarter from 20.18 percent during the third quarter. Average asking rental rates were up to $17 per square foot per year at the end of the fourth quarter, better than the $16.59 rate at the end of the previous quarter. This increase in rental rates for deals that have been completed are allowing landlords to increase their asking rates for vacancies. With construction of office space still minimal, particularly in the suburban market, this increase in rates should continue.
What kinds of concessions are being given right now? Landlords are still offering limited free rent to entice credit-worthy quality tenants to move to their buildings. The size of concessions is getting smaller as the market improves.
INDUSTRIAL OUR EXPERT: BRIAN YOUNG, SENIOR VICE PRESIDENT, MANAGING BROKER, CUSHMAN & WAKEFIELD THALHIMER
Where is the activity as far as industrial space in the Upstate? Are there large blocks available? What are the submarket areas? In general, we have seen a real flight to quality as users have flocked to higher-quality space, thus eliminating almost all of the available Class A space. There are a few Class B and C buildings. Most of the industrial >>