The supply of available factory space is dwindling here
MAY 23, 2011 12:49 p.m. (0)
That’s the good news. The bad news is availability of industrial buildings is growing thin, putting the area at a competitive disadvantage in competing for new manufacturers.
With construction of spec buildings at a 30-year low, the supply is not being replenished.
Eric Miller, director of business development at the Upstate Alliance, said while the Upstate was fortunate in not suffering as big a hit on manufacturing as other areas the glut of abandoned industrial buildings elsewhere makes it hard to compete on price with prospective new businesses.
Companies looking for new manufacturing sites prefer to either lease or buy an existing building rather than build, he said, for several reasons, chief among them “very different financial environment in terms of getting buildings financed” in the credit-difficult post-recession environment.
“This area is very attractive for a lot of different reasons, but if they have to build a building here versus moving to an area where existing building owners will be very aggressive on lease rates puts us at a competitive disadvantage,” he said.
According to the database kept by Upstate Alliance, there are 55 buildings of 100,000 square feet on the market, 19 of which are 250,000 square feet or more. Last August, the database listed 69 and 22 respectively.
Laurens Nicholson, senior partner of Lee & Associates (formerly Bentley Commercial), built the last spec building in Greenville County, one completed in early 2008 on White Horse Road which remains vacant.
According to the CoStar Industrial Report, completion of industrial sites hit 30-year highs of 3.8 million square feet in 1988 and 1994 and was right around or slightly below the annual average of 1.5 million immediately preceding or in the early days of the recession. Last year, it was zero.
Thus far this year, construction has picked up but mainly because of the 950,000-square-foot-building ZF, an auto supplier, is building in Laurens County and the 90,000 square feet Century Plastics is adding to its facilities in Simpsonville.
Nicholson said leasing and purchasing of existing industrial buildings picked up late last year with “explosive growth” in December and has continued at steady rate for six months. The vacancy rate was 10.5 percent at the end of the first quarter, down from 10.6 percent the end 2010.
Along with the increase in leasing and buying activity, he said, lease rates “are starting to pick up a little bit,” and he is “bullish that 2011 is going to be a good year.”
The purchase of the vacant Sara Lee plant by Amy’s Kitchen for its first U.S. plant outside the West Coast was an easy sell because it has refrigeration units Amy’s needs for its frozen products, and the building and property had been well maintained and secure, said Randy Stump, the Charlotte broker who listed the property and handled the transaction.
Also attractive to Amy’s Kitchen, which makes organic vegetarian products, was that Sara Lee had used the plant for frozen dough and bagels “and meat had never passed through there,” said Tavia Gaddy, project manager for Greenville Area Development Corp. who accompanied Amy’s executives on their first tour of the plant last June.
“This was in the top 10 percent as far as ease of transactions goes,” said Stump, who has been in the commercial real estate business for 27 years.
Amy’s Kitchen is paying $3.3 million for the building and 15 acres and plans to acquire adjacent acreage and eventually double the capacity of the plant as part of its $63 million investment. As part of the taxpayer incentives it is receiving, it is getting a state grant of $1 million to buy the additional property or new equipment.
Nicholson said Amy’s decision to come to Greenville is part of a trend he is seeing in “growth in food-based manufacturers who come here because we are a right-to-work state.”
He expects to start seeing smaller food companies “start taking the smaller products.”
“It makes sense because the Southeast is growing, so the food companies need to be closer because of the transportation costs with gas prices rising,” said Kevin Landmesser, vice president of GADC.
One of the largest and one of the oldest industrial properties on the market, Crescent Center, the old Hoechst Celanese fiber plant on Carolina Point Parkway behind Whole Foods on Woodruff Road, is no longer in the Upstate Alliance or GADC databases, although it is not clear why.
The property, which is classified as a brownfield because of possible contamination, has 750,000 square feet of factory space, plus office space. In 2007, a proposal to demolish the buildings for a residential, office, hotel and public park development went nowhere.
“It is available for sale,” said Greg Haynes of CB Richard Ellis in Atlanta, which is listing the property. “We’ve got two active prospects right now.”
According to county tax records, the two buildings that once constituted the Celanese plant are separately owned, and each has market value of $3 million, and each sits on about 19.5 acres.