Columbia’s Commercial Real Estate Market Going Strong Despite Recent ChallengesApr 11, 2022 05:10PM ● By C. Grant Jackson
As the coronavirus pandemic has continued, Columbia’s commercial real estate market has been resilient, and commercial brokers and agents see the market remaining strong across all sectors.
“The foundation is strong if you are in the Midlands. Compared to a lot of the national stories of doom and gloom, we haven’t seen that here, and I don’t expect we will see that here,” said Allen Wilkerson, vice president of Colliers International in Columbia.
Each segment of the commercial market – office, industrial and retail – has its own story to tell, Wilkerson said, and the market is expected to continue to do well in 2022.
Industrial leading the way
Colliers fourth-quarter 2021 industrial report notes that, “The mindset for developers in the Columbia market has historically been, ‘if you build it they will come.’ Current market conditions have caused the mindset to shift to ‘build it because they are already here.’”
The report noted that “industrial demand is strong, and availabilities are scarce.” Colliers reported that in 2021, only a combined 312,780 square feet of new industrial space in three buildings was delivered, and on average 50 percent of the space was pre-leased prior to completion.
Ben Brantley, vice president with CBRE’s industrial and logistics group in Columbia, says simply that the market is “on fire. It feels like the market we’ve been waiting to see. ... Industrial has finally come to us. Our infrastructure, our business friendly climate, everything is kind of coming home to roost as it relates to industrial.”
CBRE Columbia reported both an historic single-quarter net absorption of 1.4 million square feet for the fourth quarter of 2021, as well as an historic low vacancy rate for industrial of 4.39 percent.
“At the end of the day, demand is there and the supply is not,” Brantley said. He says one of the larger challenges has been trying to find land that developers can build on to meet the demand. ”Richland and Lexington County control some of the better sites, and they are of course holding out for manufacturing jobs, capital investment. And most of the developers we are talking with are looking at distribution and warehousing.”
Columbia has a “serious supply constraint of suitable properties in the area we serve,” echoed Thomas Beard, vice president at Colliers and an industrial market specialist.
But some much needed relief is on the way. Colliers reports that at least 450,000 square feet of speculative investment product is expected to begin construction during the first quarter of 2022, and another 1.37 million square feet is proposed for the remainder of 2022 into 2023 to help satisfy demand.
Major projects include the 247,000-square-foot Airport Distribution Center on Platt Springs Road next to the Columbia Metropolitan Airport. A project of Scannell Properties of Indianapolis, it will be the largest spec building delivered in the Columbia Market. And Collett, a Charlotte-based property developer, planned to break ground early this year on a 210,000-square-foot building in the Carolina Pines Industrial Park in Blythewood.
Beard notes that over the last 18-24 months, “the Columbia market has experienced a wave of regional and national development interest we have never seen before. I think people are starting to realize that, ‘Hey, we have been overlooking some pretty obvious opportunities here in Columbia.’”
Brantley feels that “demand is going to keep boiling for 2022, and it is going to be more and more frustrating if we don’t have product on the map. There is only so much we can do.”
Covid-19 impacting 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 reported that Class A rents remained strong despite the rising vacancies and net negative absorption.
NAI Columbia’s fourth-quarter 2021 report for the Midlands noted that while “move-outs and the economic disruption” in 2020 and 2021 lifted office vacancy rates to about 10 percent, long-term tenants in the government, healthcare, and higher education sectors helped keep occupancies relatively stable. Several of the largest education-related tenants have renewed leases, boding well for 2022. And while Colliers reported a net negative absorption of 218,787 square feet for the fourth quarter, most of that – 146,000 square feet – came in one building in the Northeast Columbia submarket.
From the office standpoint, the market has been really strong. “It is really a flight to quality across the market from an office perspective, specifically in the suburbs,” Wilkerson said.
Much of that has to do with workers returning to the office coming out of the pandemic. Employees who have been working at home for a year and a half don’t want to come back to a subpar property. “If I’m going to come back to work, I want to come to a place that I feel good about going to every morning. Those tend to be the buildings that have been well capitalized and invested in over the last two years,” he said. Those owners who have either preemptively invested or have started to invest have performed well, he said.
Brick-and-Mortar Retail Strong
In the retail sector, Wilkerson noted that the pre-pandemic refrain that “retail is dying, retail is dying, Amazon is going to kill retail” just isn’t holding up.
“Go to Forest Acres and tell me retail is dead, go to the Vista and tell me retail is dead, go to Harbison. It is just not.” Columbia’s retail vacancy rate in fact decreased to 4.75 percent in the fourth quarter of 2021 compared to 6 percent in 2020, Colliers reported, with a positive annual absorption of 192,006 square feet.
Brick and mortar stores that have focused on their core customer base have done well, Wilkerson said. “Those who have not tried to be what they are not have done incredibly well, and those that have focused on being where they need to be from a demographic and psychographic perspective have done incredibly well. While those that have ventured just a little too far out, it has been tough for them,” he said.
Some retailers are getting pushed out because of the online effect, he said. “But retail – brick and mortar – when you look at the occupancy, it has performed well. You are seeing occupancy remain fairly high on the retail front. Look at Main Street. Main Street occupancy has performed well throughout the pandemic, and will continue to perform well coming out of the pandemic.”
Eyes on BullStreet and Richland Mall
Two Columbia projects that are being watched closely in 2022 are the continuing development of The BullStreet District, the historic former state mental health hospital property, and the potential redevelopment of Richland Mall in Forest Acres.
With a 20-year build-out horizon, the 181-acre BullStreet District 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 School of Medicine. Hughes Development Corp. of Greenville is the master developer.
BullStreet has seen not only renovation and restoration of older buildings but also new construction, including the First Base Building adjacent to the baseball park, an REI store, and Starbucks. Wilkerson notes the importance of the Starbucks, which sits on a highly visible out-parcel. “When Starbucks comes in, it puts a stamp of approval on any development.”
Currently under construction and slated for completion this summer is The Westlawn, a 79,000-square-foot office building. Several other projects have been announced or are under construction, including apartments, townhomes, parking garages, and retail spaces.
Columbia-based Avant Holdings, headed by Todd Avant, former chief executive officer of NAI Avant, is renovating the Laundry Building, Bull Street’s oldest surviving service building. The 15,000-square-foot building will include space for restaurants, retail, and/or commercial tenants and is expected to be available at the end of 2022.
“With the strong development pipeline at the BullStreet District, we feel the timing is perfect to move forward with this exciting adaptive reuse project,” Avant said in a news release. “Our hope is to welcome a mix of dynamic businesses to the Laundry Building, which could include a restaurant, retail shops, creative office, or a brewery with a beer garden.”
Wilkerson says the key to BullStreet will be having a true live-in day-to-day population. “You need to have the day-to-day, on-site population to be able to service restaurants, to be able to shop at stores, to be able to drive a retail environment,” he said.
And that population seems to be coming. Two of four phases of the TownPark townhomes are complete and owner-occupied, with phase 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 largest projects is Bull Street, the building will have 208 units when complete. The renovation is being done by Clachan Properties of Richmond, Virginia.
Another property that is being looked at is the potential redevelopment of Richland Mall at Beltline Boulevard and Forest Drive in Columbia.
Reports surfaced in February and were confirmed by Aaron Dupree, first vice president with CBRE in Columbia, that an unnamed firm has a tentative contract on the site. Dupree told the Charleston Post & Courier newspaper that the plan most likely would be to tear down most or all of the 80,000 square-foot space and develop a mix of condos, apartments, and new retail space.
The Forest Acres mall is largely abandoned. With the closure of the Regal Cinemas in February, the only remaining tenants are Belk department store and Barnes & Noble book store.
Colliers’ Wilkinson 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 is going to be a robust market in 2022-’23 going forward,” Wilkerson said.