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Investments in Charleston-area industrial sites ramp up as supply chain opportunities arise

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Back-to-back record-setting sales of Charleston-area industrial properties illustrate a growing interest in this region from investment firms that specialize in warehouse and distribution centers as the snarled supply chain puts a focus on new markets in close proximity to the Southeast’s booming population. 

New York-based KKR & Co. recently closed on a 1 million-square-foot distribution center at the Charleston Trade Center in Summerville, paying $109 million to acquire the property from Charlotte-based developer The Keith Corp. It is the largest price paid for a single industrial building in the three-county Charleston market.

It follows the previous high of $79 million that Galaxy Investments, a subsidiary of New York-based Cambridge Holdings, paid in October for the A&R Logistics distribution center on U.S. 52.

“Industrial is the crown jewel in the real estate market because of COVID-19 and industrial investments have ramped up rather significantly in the Charleston market during the last 18 months,” said Lee Allen, managing director of commercial real estate firm JLL, which brokered both sales.

Global supply chain disruptions have put a premium on industrial space located near major import centers, like the Port of Charleston, according to a report by CBRE, a commercial real estate firm. Vacancy rates in the Charleston region hit a historic low of 1.86 percent in the third quarter as leasing surged, the report states, adding there is about 7 million square feet of distribution space under construction and millions more on the drawing board.

“The unprecedented amount of demand coupled with the proximity to the port … will continue to contribute to elevated activity in the area,” CBRE said. “As market fundamentals continue to strengthen, developers and investors alike remain bullish on the Charleston industrial market.”

Massie Flippin, a partner at Trinity Capital Advisors, calls the region’s industrial fundamentals “highly favorable,” adding the Charlotte-based investment firm recently acquired 78 acres at Palmetto Commerce Park in North Charleston for 850,000 square feet of warehouse and distribution space.

“We’re confident that the port, Charleston’s solid manufacturing base, and the region’s deep labor pool will continue to drive growth and increase demand,” Flippin said. 

The record-setting Charleston Trade Center property is fully leased to Delray, Fla.-based Twin Star Home, which imports a range of indoor and outdoor furniture, including coffee tables, bar stools, fire pits and patio seating. Its products are sold through retailers like Home Depot, Costco and Wayfair. Furniture is the fastest-growing import commodity at Charleston’s port as retailers look for a gateway to serve the growing number of homes and residents in the Southeast.

“We believe that state-of-the-art distribution centers in close proximity to major population centers and key transportation hubs will have significant staying power and area great match for (KKR’s) long-term capital,” Ben Brudney, a director in the investment firm’s real estate group, said in a written statement.

The region is also attracting investments from overseas. For example, Singapore’s state-owned Mapletree Investments Pte Ltd. paid more than $200 million in October to take ownership of more than a dozen warehouses in the Charleston and Upstate regions through its Victoria Logistics Assets LP affiliate. The South Carolina acquisitions are part of a $3 billion U.S. real estate spending spree that Mapletree embarked on last year.

“The U.S. logistics sector is amongst the best-performing and most-resilient of all the real estate markets in which Mapletree operates globally,” Michael Smith, the company’s regional CEO for Europe and the U.S., said in a written statement after the South Carolina investments were announced.

CBRE said industrial markets nationwide have seen huge growth in institutional investments and many of those firms are finding opportunities in the Charleston-area as the market matures.

“These veteran landlords have seen explosive rent growth in other markets which has led them to push the envelope of asking rents in the Charleston market,” the CBRE report stated. “For example, buildings located in Palmetto Commerce Park have experienced monumental rent growth over a one-year time period. With a prime location, and minimal space available, the average asking rents have swelled 13.5 percent over the course of one year.”

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