Charleston Industrial Real Estate Construction Faces Downturn, According to Avison Young
In what may come as a disappointment for many, Charleston’s industrial real estate construction boom, witnessed in 2022, seems to have fizzled out. A recent market report from Avison Young indicates a substantial decline in construction starts.
In contrast to nearly 12 million square feet of space under construction in 2022, approximately short of 2.5 million square feet of industrial space is expected to commence construction in 2024. Consequently, the area looks to be reverting to its pre-2020 levels of industrial construction starts.
Berkley County Registers Highest Vacancies
Outlying Berkley County appears to be bearing the brunt of the downturn, with the area observing the highest vacancies. The county received 61% of all the market’s development activity over the last two years. Similarly, Berkeley and Dorchester Counties have been the recipients of most of the recent development activities. As a result, these submarkets now hold the highest percentage of available space.
Leasing Volume Witnesses Marginal Increase
The market’s leasing volume noted a marginal increase from Q4 2023 to Q1 2024. However, according to the Avison Young report, the uptick in activity wasn’t robust enough to balance out the negative absorption recorded this quarter.
In some encouraging news, the report predicts: “The slowdown in new inventory should allow demand to catch up with the rapidly growing supply.”
Charleston Industrial Market Registers Negative Absorption
In a first since 2020, the Charleston industrial market registered negative absorption amounting to 515,000 square feet. However, a “significant increase in tenant tours” during Q1 this year could help reverse this trend.
Buildings larger than 500,000 square feet were the only category to report positive absorption this quarter with a positive 390,000 square feet. On the other hand, the average base rent for year-to-date 2024 ($8.99) is tracking a decrease by 6.0% compared to 2023, though it still substantially surpasses the average asking rate of $7.94.
The report expresses a positive outlook despite the downcast, stating, “Base rents should increase throughout the year as demand catches up with supply.” As Charleston navigates these challenging times, all eyes will be on how the market responds and recovers in the forthcoming quarters.
