John McCloud is editor of Industry Property Journal, from which this article is excerpted.
Charleston, SC—Hillwood Investment Properties unveiled plans for a major project that will be not only the largest industrial development in the history of this port city but also one of the largest announced this year for anywhere in the US. The Dallas-based company plans to break ground in Q1 '08 on Charleston Trade Center, a 750-acre industrial project that could ultimately have up to eight million sf of logistics and light manufacturing space and one million sf of other uses.
According to Hillwood senior vice president Gary Frederick, the project seeks to take advantage of growth at the Port of Charleston. In the fiscal year ending this past June 30, port container volumes totaled 1.88 million 20-foot equivalent units. Though this figure was down 4.8% from last year's record-breaking total, the South Carolina State Ports Authority, which is headquartered in Charleston, projects significant growth over the next 10 years. The port currently ranks sixth in the US in terms of cargo value.
"The major shippers and suppliers are engaged in what we call the East Coast diversification strategy," explains Frederick. "They're spreading volumes from the overcrowded West Coast ports to ports on the Gulf and East coasts."
A major component of the strategy entails expansion of the Panama Canal to handle larger ships, and Charleston has responded by building facilities capable of handling the super-sized post-Panamax ships that are already making their way to East Coast ports. The Ports Authority has budgeted $300 million for port expansion and improvements, including construction of a new terminal that will increase container-handling capacity by almost 50%.
The Q3 report from Grubb & Ellis pegs Charleston industrial vacancy at 10.6%. According to the report, while transaction volume is down compared with last year's pace, many see the decline a return to normalcy after a torrid pace in '06 that was generally viewed as unsustainable. At the same time, the report shows market rents continuing to tick upwards, reaching an annual average of $4.52 per sf for warehouse/distribution product and $5.88 per sf for flex space.
Port growth is not the only impetus for the development, Frederick tells IPJ. "The project is surrounded by large-scale residential growth," he says. "Some 30,000 to 40,000 residential units are scheduled to be built nearby. We will also be able to provide a site for the employment and services the new residents will need."
Frederick says Hillwood got a flexible planning overlay for the property that will enable it to include office, commercial, retail and even some high-density residential space in the development, depending on demand. But he emphasizes the primary focus will be industrial and notes the project will launch with construction of a 400,000-sf spec warehouse/distribution building that will be ready for move-in before the end of 2008. The building can be expanded to 652,340 sf.
Frederick, who expects build-out to take about 10 years, says the project is already being actively marketed to prospective tenants. Hillwood gave the marketing assignment to Michael Ferrer and Thomas Buist Jr. of Barkley Fraser, a Charleston-based affiliate of Grubb & Ellis.
While the Hillwood project will be the largest industrial development in Charleston, a subsidiary of Dubai-based Dubai International Capital LLC recently announced its intent to purchase 1,300 acres in Orangeburg, SC for development of an inland multimodal logistics center. This site is about equidistant between the ports of Savannah, GA and Charleston. It will also be close to the proposed future Jasper, SC port expansion site, which is to be far larger than either of the two existing ports and will be operated as a joint venture between the states of South Carolina and Georgia.
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