Back-to-back record-setting sales of industrial properties illustrate a growing interest in the Charleston region from deep-pocketed investors that buy warehouse and distribution centers as a snarled supply chain puts a focus on markets near the Southeast’s booming population.
New York-based buyout giant KKR & Co. of “Barbarians at the Gate” fame provided the latest evidence. It 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 a development group led by The Keith Corp. of Charlotte. It is believed to be the highest price on record for a single industrial structure in the three-county Charleston market.
The acquisition 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. Highway 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 the commercial real estate firm JLL, which brokered both sales.
Global supply chain disruptions have put a premium on industrial space near major U.S. import hubs, such as Charleston, according to a report by CBRE Inc., a commercial real estate firm.
The analysis found that vacancy rates in the Charleston region hit a historic low of 1.86 percent in the third quarter as leasing surged. Meanwhile, about 7 million square feet of new distribution space is under construction and other projects are 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, described 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.
KKR’s Ben Brudney, a director in the firm’s real estate group, said in a written statement that it believes “that state-of-the-art distribution centers in close proximity to major population centers and key transportation hubs will have significant staying power and are a great match” for the company’s long-term investment strategy.
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.”