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October 15, 2019

SperryCGA_Grififn Partners Press Release–

Upstate, South Carolina Commercial Real Estate Mid Year State of the Market Report
Including Greenville, Anderson, and Spartanburg markets

As we enter the 4th Quarter of 2019, it is important to look back at mid year and how it will help to diagnos the overall health of the commercial real estate market in the upstate moving toward year end and into 2020. First, especially for those unfamiliar with real estate economics, we must address the four phases of the real estate cycle.

After this we will briefly break down the each major commercial real estate sectors and compare each to see where we land in the upstate verses the national trends. The four phases of the real estate cycle (not in any particular order) includes; recession, recovery, expansion, and hypersupply. Within each cycle there generally resides three 3 stages. As you can see further explained below, they often can overlap.

Stage 1
General characteristics of stage 1 incudes; increasing vacancy rates, negative or low absorption rates, low to medium rental growth rates, moderate to high new construction on line, and low to moderate employment growth.
Stage 2
General characteristics of stage 2 includes; med to high rental growth rates, decreasing vacancy rates, moderate to high new construction on line, moderate to high employment growth, and high absorption rates.
Stage 3
General characterisicts of stage 3 includes; decreasing vacancy rates, moderate to high employment growth, medium to high rental growth rates, moderate to high new constructio, and high absorpton rates.
Stage 4
General characteristics of stage 4 includes; decreasing vacancy rates, low new construction, moderate absorption, low to moderate employment growth, and negative to low rental rate growth.

We will further break down the major commercial sectors including Industrial, Retail, Office, and Multifamily and compare each to the national trends. Let’s start with Industrial.

The upstate industrial market remains healthy however showing some signs of movement going into the third stage. It is unknown when hypersupply may become a factor, but absorption seems very healthy. Concerns are on the horizon for many large speculative builds as US shipping has seen recent slowing. However the local and regional southeastern market remains one of the strongest in the Country. Locally we can see this with the Port of Charleston and the SC Ports Authority Inland Port in Greer consistenly posting new records. Greenville, along with almost all major and secondary markets, fall within the expasion phase. One concern locally is that the employment rate is slowing. The employment rate locally is slowing surprisingly because there is noone else to employ, per say. While at first this may gleam as a negative for the industrial and manufacurting sectors of the upstate, partnerships are beeming with excitement to foster a new skilled workforce. Public/ private partnerships between Clemson University, Greenville Tecnical College, and the major employers in the area including BMW of North America (located in Spartanburg County), and Michelin with North American headquarters in Greenville County with distribution and manufacturing facilities spread throughout several upstate counties. The Inland Port Greer moved 15,338 rails in July, that’s 57% more than July of 2018 according to the South Carolina Ports Authority. Flex industrial asset value posted an increase in value of +.1-1.9%. Industrial assets posted an increase in value between 2-3.9.

The upstate retail market remains healthy.

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