As the coronavirus pandemic continues, Columbia’s commercial real estate market has been resilient, and brokers and commercial agents see the market remaining strong across all sectors.
“The foundation is solid if you are in the Midlands. Compared to a lot of national stories of woe and sadness, we haven’t seen that here, and I don’t expect we’ll see it here,” said Allen Wilkerson, vice president of Colliers International in Colombia.
Each segment of the commercial market — office, industrial and retail — has its own story to tell, Wilkerson said, and the market should continue to do well in 2022.
The industrial leader
Colliers’ fourth quarter 2021 industry report notes that “the mindset of developers in the Colombian market has always been, ‘if you build it, they will come.’ Current market conditions have driven the mindset to “build because they are already there”. »
The report notes that “industrial demand is strong and supplies are scarce.” Colliers reported that in 2021, only 312,780 square feet of new industrial space in three buildings was delivered, and an average of 50% of space was pre-leased before completion.
Ben Brantley, vice president of CBRE’s industrial and logistics group in Colombia, simply says that the market is “on fire. It looks like the market we’ve been waiting to see. … The industrialist has finally come to us. Our infrastructure, our business-friendly climate, everything has kind of gone home as far as the industry is concerned.
CBRE Columbia reported both historic single-quarter net absorption of 1.4 million square feet for the fourth quarter of 2021, as well as an industry-low vacancy rate of 4.39%.
“At the end of the day, the demand is there and the supply isn’t,” Brantley said. He says one of the biggest challenges has been trying to find land that developers can build on to meet demand. “Richland and Lexington County control some of the best sites, and of course they resist manufacturing jobs and capital investment. And most of the developers we talk to are looking at distribution and warehousing.”
Columbia has a “serious supply constraint of suitable properties in the area we serve,” echoed Thomas Beard, Colliers vice president and industrial market specialist.
But much-needed relief is on the way. Colliers reports that at least 450,000 square feet of speculative investment products are expected to begin construction in the first quarter of 2022, with an additional 1.37 million square feet proposed for the remainder of 2022 through 2023 to help meet Requirement.
Major projects include the 247,000 square foot airport distribution center on Platt Springs Road adjacent to Columbia Metropolitan Airport. A project by Scannell Properties of Indianapolis, it will be the largest specification building delivered to the Columbia market. And Collett, a Charlotte-based property developer, planned to open a 210,000-square-foot building in Carolina Pines Industrial Park in Blythewood earlier this year.
Beard notes that over the past 18 to 24 months, “the Colombian market has seen a surge of interest in regional and national development that we have never seen before. I think people are starting to realize that “Hey, we overlooked some pretty obvious opportunities here in Colombia.”
Brantley believes that “demand is going to continue to boil over for 2022, and it will be increasingly frustrating if we don’t have product on the chart. We can’t do much.
Covid-19 impacts the office market
In the office market for the fourth quarter of 2021, Colliers and NAI Columbia both reported that while Covid-19 caused some increase in vacancies, the market remained strong. Colliers said Class A rents have remained high despite rising vacancy rates and negative net absorption.
NAI Columbia’s 2021 fourth quarter report for the Midlands noted that while “relocations and economic disruption” in 2020 and 2021 pushed office vacancy rates to around 10%, long-term tenants in areas of the government, health and higher education have helped maintain a relatively stable occupation. Several of the largest education-related tenants have renewed their leases, which bodes well for 2022. And while Colliers reported net negative absorption of 218,787 square feet for the fourth quarter, the bulk – 146,000 square feet – came to a building in the northeast of Colombia submarket.
From an office perspective, the market has been very strong. “It’s really a flight to quality in the market from an office perspective, especially in the suburbs,” Wilkerson said.
Much of this has to do with workers returning to the office after the pandemic. Employees who have been working from home for a year and a half do not want to return to a below-average property. “If I have to go back to work, I want to come to a place where I feel good to go every morning. These are generally the buildings that have been well capitalized and invested in over the past couple of years,” he said. Owners who have invested preemptively or who have started investing have had good results, he said.
In the retail sector, Wilkerson noted that the pre-pandemic refrain that “retail is dying, retail is dying, Amazon is going to kill retail” does not simply does not hold.
“Go to Forest Acres and tell me retail is dead, go to Vista and tell me retail is dead, go to Harbison. This is simply not the case. Columbia’s retail vacancy rate actually declined to 4.75% in the fourth quarter of 2021 from 6% in 2020, Colliers reported, with positive annual uptake of 192,006 square feet.
Brick-and-mortar stores that focused on their core customer base did well, Wilkerson said. “Those who haven’t tried to be who they are not have done incredibly well, and those who have focused on being where they need to be demographically and psychographically have incredibly well done. While those who have ventured a bit too far, it has been difficult for them,” he said.
Some retailers are being kicked out due to the online effect, he said. “But retail – brick and mortar – when you look at occupancy, it’s done well. You see that occupancy remains quite high on the retail front. Look at the main street. The Main Street Occupation has performed well throughout the pandemic and will continue to perform well as it emerges from the pandemic.
Eyes on BullStreet and Richland Mall
Two Columbia projects that are being watched closely in 2022 are the continued development of the BullStreet District, the former historic property of the state psychiatric hospital, and the potential redevelopment of the Richland Mall in Forest Acres.
With a 20-year construction horizon, the 181-acre BullStreet neighborhood is the largest urban redevelopment project on the East Coast. The project contains a mix of office, retail, residential and public amenities, and is the future home of the University of South Carolina Medical School. Hughes Development Corp. of Greenville is the lead developer.
BullStreet has seen not only the renovation and restoration of old buildings, but also new construction, including the First Base Building adjacent to the baseball park, an REI store, and Starbucks. Wilkerson notes the prominence of the Starbucks, which sits on a highly visible exterior plot. “When Starbucks comes along, it puts a stamp of approval on any development.”
Currently under construction and slated for completion this summer, The Westlawn is a 79,000 square foot office building. Several other projects have been announced or are under construction, including apartments, townhouses, parking lots and commercial spaces.
Columbia-based Avant Holdings, led by former NAI Avant CEO Todd Avant, is renovating the Laundry Building, the oldest service building on Bull Street. The 15,000 square foot building will include space for restaurants, retail and/or commercial tenants and is expected to be available in late 2022.
“With the BullStreet District’s strong development pipeline, we believe the timing is perfect to move forward with this exciting adaptive reuse project,” Avant said in a press release. “Our hope is to accommodate a mix of vibrant businesses in the laundry building, which could include a restaurant, retail stores, a creative office or a brewery with a beer garden.”
Wilkerson says the key to BullStreet will be having a real daily population. “You have to have the daily population there to be able to serve restaurants, to be able to shop in stores, to be able to run a retail environment,” he said.
And this population seems to be coming. Two of the four phases of TownPark townhouses are complete and owner-occupied, with phases three and four following in 2022. Additionally, residents are expected to move into the first apartments this spring in the historic Babcock Building. One of the biggest projects is Bull Street, the building will have 208 units when completed. The renovation is being done by Clachan Properties of Richmond, Virginia.
Another property that is under consideration is the potential redevelopment of the Richland Mall on Beltline Boulevard and Forest Drive in Columbia.
Reports surfaced in February and were confirmed by Aaron Dupree, senior vice president of CBRE in Colombia, that an anonymous company has a tentative contract at the site. Dupree told the Charleston Post & Courier newspaper that the plan would most likely be to demolish most or all of the 80,000 square foot space and develop a mix of condos, apartments and new commercial space.
The Forest Acres shopping center is largely abandoned. With Regal Cinemas closing in February, the only remaining tenants are Belk Department Store and Barnes & Noble Bookstore.
Wilkinson of Colliers said he hopes the redevelopment happens because it is needed. “If that happens, it will be a dynamic, game-changing development for Columbia,” he said.
Overall, coming out of the pandemic, “I think it’s going to be a robust market in 2022-23 going forward,” Wilkerson said.