A potential dockworkers strike that could shut down the Port of Charleston is one of the issues that has businesses reluctant to commit to warehouse space in the region.
English Hurteau/S.C. State Ports Authority/Provided

By David Wren dwren@postandcourier.com

A glut of supersized warehouses is keeping the vacancy rate high among Charleston-area industrial properties, and most of the businesses that could fill the space are in a holding pattern until it's clear who will be in the White House in January and what economic policies the next president will back.

A trio of reports from industrial real estate firms pegs the three-county region's vacancy rate at anywhere between about 11 percent and 17 percent — up from about 3 percent two years ago when a flurry of new construction was getting underway. Despite the variance, they all agree the mega-warehouses offering up to 1 million square feet of space or more are to blame.

There is still interest in the local industrial real estate market, like Crosspoint at Palmetto Commerce Park (above) in North Charleston, but many businesses are waiting to see who wins the presidential election before making a move.

"This vacancy is concentrated, with only 10 percent of buildings representing 93 percent of the vacancy, driven by changes in tenant trends," according to a report by Brett Cox, research manager for the Chicago-based real estate firm JLL. "Smaller buildings are attracting more users, significantly outpacing larger ones."

A separate report by CBRE Inc. says nearly 3.5 million square feet of speculative space — with no tenants lined up before construction — has been added to the market this year. Those warehouses with 300,000 square feet or less have a vacancy rate less than half the bigger buildings.

"We probably have one of the highest vacancy rates in the Charleston market that we've had in a decade, and I attribute a lot of that to the big-box development," said Mike White, broker in charge of Charleston Industrial.

White said many of the mega-warehouses started coming online at the same time demand was diminishing — something that's playing out in every medium- and large-size industrial market nationwide.

"I've been to plenty of conferences and participated in webinars this year and everyone is singing the same tune," White said. "Overall, trade has been diminishing and commercial activity has been crimped because of higher interest rates and a lack of lender interest in providing financing."

CBRE said those trends have "complicated the leasing landscape," with landlords considering smaller leases as a way to help fill space rather than holding out for a single user needing a lot of room.

The tenant mix is also changing, with fewer automotive suppliers looking for space and more defense industry contractors signing leases.

Asking rents are stuck at about $7.65 per square foot, according to the Cushman & Wakefield.

"The market currently favors tenants, but this situation is likely temporary," JLL's Cox said, adding 90 percent of leases signed this year are for spaces of 350,000 square feet or less. "There is approximately 12 to 18 months of new product available, and once this inventory and upcoming deliveries are absorbed, the market is expected to balance."

Industrial investments

The top industrial real estate leases and sales in the Charleston region during the third quarter of 2024.

Top Leases

SAIC (defense contractor), 7413 Magi Road, Hanahan, 315,650 square feet, renewal
Amazon (retail), 7063 Palmetto Commerce Parkway, North Charleston, 315,000 square feet, build to suit
East Coast Warehouse and Distribution (cold storage), 2040 Sewanee Road, North Charleston, 259,200 square feet, built to suit
PanaSystems US (consumer electronics), 4280 Pace Street, North Charleston, 155,603 square feet, renewal
Perfection Hytest (automotive supplier), North Pointe Industrial Park, Hanahan, 145,803 square feet
Harbor Logistics (third party logistics), 925 Commerce Circle, Hanahan, 50,400 square feet, renewal

Top sales

Fruit of the Loom building, 1116 Business Park Dr., Summerville, 753,222 square feet, $50 million
3801 Meeting Street Road, North Charleston, 28,997 square feet, $2.2 million
7269 Cross Park Drive, North Charleston, 22,800 square feet, $3.2 million

Source: CBRE; Cushman & Wakefield

White of Charleston Industrial said he doesn't expect much of anything to happen until the political landscape clears and a deal is struck between dockworkers and the container shipping lines that hire them at East and Gulf Coast ports. The U.S. Maritime Alliance and the International Longshoremen's Association said they'll resume contract talks next month with a Jan. 15 deadline set for a new deal.

"Every election year, we seem to be in a cycle where the decision-makers tap the brakes and want to see what the policy changes will be," he said. "This election is characterized by the extremes, and the pension will swing widely in one direction or the other. I'm personally quite positive that the election, regardless of who wins, is going to turn the attention of policymakers toward the economy."

And with the Port of Charleston driving much of the industrial activity in the region, any work stoppage could create further uncertainty among businesses that might be looking for warehouse space.

"They're a major driver of logistics work in our market," White said. "If they're having an off year, they're not creating a lot of new demand for logistics space."

Big warehouses leading to big vacancy rates for Charleston-area industrial market