When you think of Charleston, South Carolina, images of historic gardens and residences, great golf and tennis and sandy beaches come to mind. Horse drawn carriage rides down cobblestone streets, buying boiled peanuts from a street vendor and watching sidewalk artists display their work make Charleston a unique place to visit and shop.

The Ryder Cup was played on Kiawah Island a few years ago and this year the Family Circle Tennis Cup made Charleston its home, bringing thousands of new visitors to the area. Daniel Island has become headquarters to companies like Blackbaud, SunCom and Cigna HealthCare.

Retail

The metro Charleston retail area is comprised of approximately 12.3 million gross leaseable square feet. This includes centers with a minimum of 30,000 square feet with the exception of Peninsula downtown Charleston. Although the area's population is about 600,000, the 3 million tourists that visit Charleston each year help to keep retailers busy and profitable.

Due to the uniqueness and importance of retail in Peninsula Charleston, individual shops in the area's historic district were also included in the most recent survey. There is over 250,000 square feet of retail space in the historic district. Since the opening of Majestic Square, anchored by Saks Fifth Avenue and located at the corner of King and Market streets, many national retailers have entered the downtown market. What was once a hodgepodge of local boutiques, gift shops and cafes now resembles a regional mall. Many local residents feel that the city has lost some of its charm; however, despite the change, downtown Charleston is still bustling with business and tourists crowd the streets nearly year round.

Daniel Island is a hot spot for development right now, and James Doran Company is enjoying its share of the excitement. The company is underway with a Publix-anchored shopping center that will include a drugstore, a bank and restaurants - typical tenants found in downtown areas, according to Bob Doran, president of James Doran Company. "This upscale center is a classic case of new urbanism," says Doran, adding that the retail deal will cost $20 million upon complete build-out. On the same street on Daniel Island, James Doran Company is also nearing completion of a 12,000-square-foot office building, of which the company plans to occupy half.

The retail market is comprised of six submarkets surrounding Peninsula Charleston: West Ashley, North Charleston, East Cooper, West Islands, Summerville and Berkeley County. The North Charleston area contains the region's highest concentration of retail space with more than 4.2 million square feet, representing one-third of the total market in the region. Following in second place is the West Ashley area with over 3 million square feet. Within these two areas are the two regional malls, Northwoods and Citadel Mall, which were recently sold to JBL.

The East Cooper area, which includes the Town of Mt. Pleasant, boasts the area's lowest vacancy rate. Two years ago Konover Properties opened The Towne Centre, a neo-traditional shopping center that features most of the national and regional stores and restaurants that one would find in an indoor mall. This 500,000-square-foot center contains over one-third of all leaseable space in the East Cooper area. Sales seem to be sluggish and a few stores have already closed their doors. However, these spaces are quickly filled by new retailers.

Some of the new big box retailers entering the market this year are Parisian, Costco and Target. Target is moving into a vacated JC Penney store at the Citadel Mall and is negotiating for at least two other locations in the area. Stein Mart is opening a second store next spring at AAC Real Estate Services' new Belle Hall Center in Mt. Pleasant. New restaurant chains that are open or planned include BW3, O'Charleys, Texas Road House and Yamota's Japanese Steak House.

Charleston has had its share of closings, including Montgomery Wards and Homeplace, and overall sales are slower than they were last year. It is anticipated that sales will stabilize because the city is blessed with international tourists and a pleasant year-round climate.

Downtown Charleston properties and beach properties have nearly doubled in price over the past 5 years and continue to be pursued by private investors. Many downtown properties have been converted to condominiums and are selling in the million dollar plus range. Peoples Building on Broad Street and First Union Plaza on Meeting Street were sold this year to private investors.

Several mid-size grocery-anchored centers have been transferred to private investors and the two regional malls in the area, Northwoods and Citadel Mall, were sold by The Jacobs Group to JBL. The suburban retail market remains active from a development standpoint with several Bi-Lo, Food Lion and Piggly Wiggly centers and a new Costco and Super Wal-Mart center coming on line.

With a number of investors who have more 1031 exchange money to spend than investments to buy, local investors are turning to larger area markets to complete their transactions. After many years of virtually no multifamily and hotel development, the last 2 years have seen over 10 new hotels and several large apartment complexes coming into the market. Most of this development has occurred in the East Cooper and West Ashley areas.

Office

Charleston's office market is comprised of approximately 6.1 million square feet in 145 buildings. The market is divided into four submarkets: Downtown, North Charleston, Mt. Pleasant/Daniel Island and West Ashley. The North Charleston market has the most office space with approximately 2.5 million square feet, while the downtown market is the most expensive. Leasing in the entire market area has slowed in the past 6 months due to the slowing economy and the effects of the summer season.

With approximately 1.4 million square feet, the Downtown submarket is the premier office location in the area. Rents range from $10 to $28.50 per square foot per year on a full service basis. Vacancy in the downtown market is around 7 percent. The historic district still boasts the best space because of its proximity to the courthouses and other governmental offices, financial institutions and larger companies. The amount of space in this submarket is limited by the lack of available land and the lack of ability to tear down older structures due to the city's strong Board of Architectural Review Board. Parking remains difficult to find in this area and costs an average of $100 per space per month.

The Liberty Center, located at 151 Meeting Street, experienced 40,000 square feet of vacancy when the Ness Motley Law Firm relocated to its own building in Mt. Pleasant. That space has been filling slowly at a rental rate of $24 per square foot. When the Haynsworth Law Firm merges with Sinkler Boyd on East Bay Street in October, 134 Meeting Street will see 14,000 square feet become available.

The Downtown office market should continue to remain strong due to the lack of new space coming on line and the long awaited reopening of the court facilities on the corner of Meeting and Broad streets.

North Charleston has the highest concentration of space with the majority of the Class A space located at Faber Place Executive Park. Faber Place has approximately 100,000 square feet available for lease with an average rental rate of $19 per square foot, full service. The majority of this space became available when Blackbaud moved to its own facility on Daniel Island. The overall vacancy rate in North Charleston is estimated at 18 percent.

The Mt. Pleasant/Daniel Island submarket contains approximately 600,000 square feet with several new buildings coming on line in the last 6 months. This market boasts the fastest growth of both office and residential space in the entire area. Rental rates range from $12 to $23 per square foot, full service. Mt. Pleasant office leasing has slowed substantially in the last 6 months while the interest in purchasing space has increased. This has been caused by the fast pace of increases in rental rates in this market - from about $14 PSF three years ago to $19 PSF today.

Daniel Island is now coming into its own as an office environment with several new buildings under construction. Evergreen Shipping, Bereni Engineering, National Bank of South Carolina, Aetna and James Doran Company have either completed or are about to complete new buildings in this area. Trammell Crow Company is building a 100,000-square-foot building to house SunCom's (AT & T) headquarters. John Allen of JA Builders has broken ground on two buildings with a total of 24,000 square feet of space. His buildings are listed at $22 per square foot per year on a full service basis.

The West Ashley submarket contains approximately 800,000 square feet of space. Rental rates in this market range from $9 to $24 per square foot per year, full service. The newest addition to this market is Albemarle Point Center, the headquarters for Piggly Wiggly Carolina, which is located just across the Ashley River from downtown. The four-story building contains 68,000 square feet with 5,100 square feet remaining for lease. Southpark Center, located at the intersection of Interstate 526 and Highway 7 in front of Citadel Mall, contains 138,000 square feet in three buildings and has 16,000 square feet available.

Overall, leasing for office space in the tri-county area has slowed over the past 6 months. However, many feel that the market will come back strongly in the last quarter of this year and continue to strengthen through 2002.

Industrial

The bulk of Charleston's industrial growth in 2000 and 2001 has been in the logistics industry. The primary reason for this is the Port of Charleston.

Charleston is the largest container port along the Southeast and Gulf coasts and ranks fourth nationwide. On the entire East and Gulf coasts, only the Port Authority of New York & New Jersey handles more containers than Charleston.

The two major factors in the Port's success are efficiency and location. Charleston is consistently ranked as one of the United States' most efficient ports and has implemented new procedures to cut gate time by more than half. Strategically located along the Eastern Seaboard, Charleston's location is equidistant between New York and Miami.

In the past, Charleston has always been on the radar screen for several companies. However, projects were often lost due to a lack of available Class A distribution space. Last year saw the beginning of speculative development by local and regional developers and amazing results.

Of the approximately 1.2 million square feet of distribution properties started in 2000, approximately 98 percent has been leased. So far, the first half of 2001 has seen an additional 1 million square feet either under construction or in the planning process. Rental rates on new space range from $3 to $3.85 per square foot.

The largest percentage of new Class A product has been built in the Charleston Regional Business Park, located in the Cainhoy area. Recently announced leases include 200,000 square feet to Icon Health & Fitness and 300,000 square feet to Sam's Club. An additional 250,000 square feet is under construction.

The Hannahan/Goose Creek area has seen the second highest volume of new development, including a 300,000-square-foot distribution center in Northpoint Industrial Park leased by McNaughton Apparel, and a 50,000-square-foot building in Mt. Holly Industrial Park leased to Jomar Logistics. This area has good access to I-26, I-526 and Highway 52, and is in close proximity to the North Charleston Port terminal. Johnson Development has started a 100,000-square-foot spec building in the North Rhett Commerce Center and has also redeveloped a 300,000-square-foot facility for Briggs Plumbing Products' corporate headquarters.

The North Charleston/Ladson area has also had it's share of success over the last year, with Sam's Club leasing 267,000 square feet from Standard Corporation in Ladson and 200,000-square-feet from Maybank Properties on Spartan Drive. Hudd Distribution Services opened its first operation in the first quarter of 2001 in Ladson Station. This area suffered a big loss when the Western Star truck manufacturing facility closed after only 1 year of operation due to a corporate merger. Currently the 400,000-square-foot state-of-the-art facility is vacant and ready for occupancy.

Development continues steadily in the Summerville/Jedburg area with a good mixture of manufacturing and distribution product. This area has good access to I-26 and I-95, and is only 23 miles from the nearest port terminal. Recently Corning Cable Systems announced it will be expanding into a new 250,000-square-foot facility.

All in all the industrial market in Charleston is very healthy with an occupancy rate of approximately 93 percent on all spaces 50,000 square feet or greater. With the addition of the several new Class A parks, future development successes should continue.

Charles Carmody is broker-in-charge, Joyce Beach is a retail specialist broker and Robert Barrineau is an industrial specialist broker with CB Richard Ellis Carmody, LLC in Charleston, South Carolina.


©2001 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.