CITY HIGHLIGHT, SEPTEMBER 2008
COLUMBIA CITY HIGHLIGHTS
Ron Anderson, Nick Stomski & David Lockwood, III
Columbia Retail Market
Recent retail development in the Columbia market—a six-county area centered around Richland and Lexington counties, with a population estimated at 720,000—has been defined by expansion, development and redevelopment.
The expansion of discounters Wal-Mart and Target has been the most significant move in the market. Since the beginning of 2007, five stores have opened and a sixth is under construction, accounting for nearly half of all new retail development. While the redevelopment of existing properties has been negligible on the overall gross leasable area, it has helped raise the occupancy of several retail submarkets. Additionally, redevelopment has been the primary source of new shop space in the downtown area’s retail core as well as the established retail corridors along Devine Street and Forest Drive. Finally, the development of small unanchored strip centers has proliferated market wide, especially in the Lexington, Harbison, and Northeast Richland submarkets.
At mid-year, the retail occupancy rate market wide was 92 percent, excluding regional malls, and the Northwest submarket was 95 percent occupied. This submarket is anchored by Columbiana Centre, the region’s best performing regional mall, but it lacks significant sites for future retail development. The Lexington market, which is 97 percent occupied, is absorbing increasing amounts of additional residential development that will support retail development along the Sunset Boulevard corridor. The Northeast Richland market is home to the Village at Sandhill, the region’s only lifestyle center, and retail space is 92 percent occupied. The Redbank market, which is 98 percent occupied, is attracting substantial residential and retail development attention. Finally, the Lower Richland market on the southeast side of Columbia is 94 percent occupied.
Three areas are absorbing the bulk of the new development. The Clemson Road corridor in Northeast Richland, anchored by the Village at Sandhill, has accounted for nearly half of all new development in the region in recent years. The Village is a 300-acre lifestyle center anchored by Belk, JC Penney and The Home Depot. The Lexington submarket is the second most active area. The Home Depot and Target recently opened along the corridor, and several national developers are looking for future sites.
Four other areas warrant attention for future development. The Garners Ferry Road corridor on the southeast side of town has a major mixed-use site named Burnside Farms. The Northwest submarket has a new Wal-Mart-anchored center under construction by Fletcher Bright. Several national developers are also looking for sites in this general area. The Redbank market has a new Wal-Mart Supercenter, and a new Lowe’s Home Improvement Warehouse is under construction. The western portion of the Clemson-Killian corridor near Interstate 77 has a new Wal-Mart Supercenter, and Hendon Properties is also developing a Lowe’s Home Improvement Warehouse.
The development of University of South Carolina’s downtown research campus should help strengthen the office and residential markets and help create the synergy to support additional retail development. Columbia’s economy is anchored by the state government, Fort Jackson and USC, so employment in the are should remain stable. Also contributing to the Columbia’s strong retail market is the Northeast Richland area, which has led the region in residential development over the past decade and is positioned to continue attracting a significant market share. This continued growth should be fueled by job expansions along the I-77 corridor.
So many new developments prove that Columbia, S.C., is a dynamic retail market that will be driven for some time by moderate but steady population growth.
— Ron Anderson is the vice president of research and technology with Columbia, South Carolina-based NAI Avant.
Columbia Industrial Market
Columbia, South Carolina, is located at the intersection of interstates 20, 77 and 26, which gives it exceptional access to the eastern part of the country. The metropolitan area is home to 715,000 people, making it the 69th largest MSA in the United States. At yearend, the market had a total of 34.2 million square feet of industrial space of which approximately 97.6 percent of this space was occupied after 775,000 square feet of total yearly absorption.
The Columbia industrial market is influenced by a number of positive factors unique to this area. In addition to proximity to the Port of Charleston the quality of the Columbia workforce has been a plus. The region has some of the highest rates of adults with a college degree or greater and adults with a high school diploma or greater. Also, the exchange rate of the dollar has improved the export-oriented manufacturing market in which South Carolina is a national leader.
Through the middle of this year, vacancy in Columbia’s industrial market remained low at 2.4 percent. Market rents are starting to level off as landlords are eager to get tenants in place in anticipation of an economic downtime. Newer multi-tenant space is renting for $4.50 to $4.75 a square foot. Older multi-tenant buildings are leasing for $3.50 a square foot. New standalone buildings are leasing for $5 to $6 a square foot, and older standalone buildings are leasing for $4 to $4.50 a square foot. Activity continues to be brisk although the amount of available space is limiting leasing options.
Kahn Development, Miller Valentine and Cohn Construction has led development in the market. Most speculative buildings are between 7,000 and 50,000 square feet. Construction of new buildings is currently concentrated in the North Columbia market along Interstate 20.
Sites for new buildings are becoming scarce throughout the area. Land prices have increased to $80,000 per acre for sites in industrial parks, and raw land is priced at $60,000 per acre. Several new parks are being developed in Lexington, Northeast Richland County and the South Columbia markets.
In addition to the activity nearest Columbia, intense speculation and development is occurring in Orangeburg County — halfway between Columbia and Charleston. Jafza-International has acquired more than 1,300 acres to develop an inland port near the intersection of interstates 26 and 95. Miller Valentine is building a 150,000-square-foot speculative building nearby that is expandable to 300,000 square feet. To the north along I-77, Fairfield County is finishing a 50,000-square-foot speculative building that is expandable to 125,000 square feet.
In summary, the future of the Columbia industrial market looks very bright. While there is a shortage of quality space and sites, during the next 12 months, speculative activity is expected to add new space to the market. Additionally, the relatively low cost of land, transportation access, and growth of the state’s port infrastructure should continue to create an ideal environment for the future industrial market.
Nick Stomski is an industrial broker with Columbia, South Carolina-based NAI Avant.
Columbia Office Market
As the commercial real estate momentum of the major markets comes into question, Columbia gains the attention of more users and investors both regionally and nationally. Investors and owners have during recent years been attracted to both the small town feel and stable economy that Columbia offers.
Columbia has not experienced the rampant growth seen in the major markets across the Southeast. Yet, this tertiary market has grown at a steady, reliable pace. Columbia has gained in job growth, outpacing many of the cities that led the way in growth just 2 years ago. The stability that is experienced in Columbia can be attributed to the fact that the market does not depend on any one sector and the economy is comprised of building blocks that do not change from year to year. These four building blocks are state government, the University of South Carolina, Fort Jackson and Columbia’s location in the geographic center of the state. Year after year, Columbia gains more attention from institutional owners and developers as they discover the area as a market to provide stable returns in a strong market and times of weakness.
The Columbia office market grew during the first 6 months of this year. As the vitality of the national economy remained in question, the local market continued to expand by slightly less than 1 percent, absorbing 68,419 square feet in the 6-month period. The positive trend was welcome news for many institutional owners who experienced significant declines with properties in other markets. The expansion of the office market, coupled with growth in local employment, demonstrates the long-term stability of the Columbia economy. As service-based employment continued to expand in the market, office occupancy increased from 85.7 percent at year-end 2007 to 86.6 percent at mid-year 2008. The market also experienced increases in the average rental rates for the 6-month period.
There is much to take pride in as the market continues to weather the slumping national economy. Numerous projects are in the planning or development phase. Most notably is a new 200,000-square-foot, 18-story, Main Street tower called Main & Gervais, which is being developed by Atlanta-based Holder Properties. Columbia’s newest high-rise is scheduled for completion in the second half of 2010. This will be the third Main Street tower developed in the last 5 years. Upon the start of construction, three anchor/joint venture partners have committed to nearly 100 percent of the space.
The 90,000-square-foot Center Vista being developed by the Miller-Valentine Group.
Activity continues to excel in the Vista area of Columbia’s downtown sector. The Vista is the highly popular warehouse district at the center of most of the retail, residential condominium and hospitality development in recent years. The Vista’s proximity to the Main Street business district, the University of South Carolina and the Congaree River has enabled its viability. Within the Vista, the planned Center Vista project, developed by Miller-Valentine Group, is a 90,000-square-foot mixed-use project that will incorporate first-floor upscale retail space with four levels of office condominiums above. Nearby, the University of South Carolina continues to push forward with plans to develop two 125,000-square-foot buildings in the University’s Innovista development, a multi-year, multi-phase research campus.
As planned projects in Columbia continue to take shape for 2009, the market will continue to attract the attention of both national investors and tenants. The stability of the market and high quality of life will allow the market to expand both in the short-term and long-term.
— David C. Lockwood, III, CCIM, SIOR, is a senior vice president with Colliers Keenan’s office in Columbia, South Carolina.
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