Capital Is Hungry for Industrial Deals—For Now

McCraney Property Co. did not intend to sell 85 Logistics Park, a 201,600-square-foot industrial facility in Greenville, South Carolina. In fact, it had turned down several investment offers, but one from an owner-user convinced them otherwise. The terms of the deal were not disclosed, but Steven McCraney, president and CEO of the company, says that it was just good timing.

“We had no intention of selling. We are developers, so selling is not usually what we do. Generally, owner-users pay a premium compared to investment capital, and I would not say that was the case here,” McCraney tells GlobeSt.com. “The buyer just came along at an interesting time when we were doing other transactions, and it just became appealing. There was no magic to it. It just made sense.” He adds that the development company had recently completed the purchase of 100 acres in Charlotte near the airport, which contributed to the incentive to sell.

Medical device manufacturer Pall Corp., a subsidiary of Danaher Corp., purchased the property—although it was built to target an ecommerce user or, as McCraney thought was possible, a BMW-oriented supplier. This is Pall Corp.’s first location in the market. The company has been in the midst of a growth spurt, reporting a 182.5% year-over-year increase in net earnings, with revenues increasing by 58%. “I think they are pleased to be in South Carolina, and I think they like the abundance of labor that is in that market. They work very closely with the state to achieve their goals, and they are good for jobs and good for the market,” says McCraney.

The offer from Pall Corp. was not the developer’s first. Most of the demand for the property came from investment capital that is looking to increase its exposure to the Southeast industrial market, which is in the midst of a boom. In the first quarter alone, net absorption totaled 5.5 million square feet in South Caroline, and the Greenville-Spartanburg industrial accounted for 59% at 3.2 million square feet.

As a result, there is increased demand from investment capital, but McCraney says that could all come to an end. “It is a really interesting time in the market,” he says. “This was not our first offer, and we had numerous unsolicited offers on the site. There is a wall of capital on one side that is yearning for yield and at the same time on the other side, we have got unheralded low interest rates. We are in a window right now that the market is very appealing to capital. I don’t think that is going to last because if inflations takes root, we are going to see an erosion in cap rates.”