By Molly Hulsey
A speculative project expandable to 1.3 million square feet will open cross-dock doors in less than 60 days in Duncan. The 504,060-square-foot warehouse, now courting e-commerce and industrial tenants, could soon mirror its 1.3-million-square-foot neighbor, a Lowe’s distribution center that ushered 150 jobs into the Upstate in January.
CRG, Clayco’s development arm, expects the Cubes at Inland 85 site to attract 200-400 jobs to the area once completed and leased.
When selecting a site for CRG’s sixth Cubes project, a large-scale industrial brand linked to Atlanta’s newest million-square-foot Amazon distribution center, the developers liked Spartanburg County’s breathing room and accessibility.
“I liked the industrial base of Greenville-Spartanburg where we could capitalize off the strengths of that industrial market,” Mike Demperio, senior vice president and Southeast regional manager of CRG, said when explaining his rationale for the investment. “The Cubes at Inland 85 has immediate access to I-85, it’s between BMW and the Inland Port and it’s in the town of Duncan, which has low taxes.”
Speculative building projects, particularly of such large dimensions, welcome a host of risks, but more than one industrial developer was willing to place a bet on the region last year. The Greenville-Spartanburg area had a record high in spec projects delivered to the market, according to Colliers data.
“I am pretty sure in 2018 and 2019, it would be accurate to call it unprecedented just in terms of the amount of industrial space, the quality and size of buildings in Spartanburg County,” said Kyle Sox, vice president of industrial development at Spartanburg’s Economic Futures Group. “It really is a new day in terms of us maturing as a manufacturing and industrial speculative market. These are the largest speculative spaces that Spartanburg has ever seen.”
According to Colliers International data, 33 industrial buildings, adding up to almost 10 million square feet, hit the Greenville-Spartanburg market last year. During rapid growth in spec square feet, the last quarter witnessed a vacancy rate increase by five points since the end of 2018. Industrial net absorption, or the net change in the supply of commercial space, also expanded by 9.6 million square feet last year.
“We’re tracking 27 industrial buildings around the Upstate right now which is pretty incredible,” John Montgomery, vice president of Spartanburg’s Colliers International office said. “It’s never been this active before.”
Developers face a catch-22 when breaking ground on any million-square-foot project. On one hand, a site’s future operations hinge on its proximity to other development and access to infrastructure like interstates and sewer. On the other hand, existing development and infrastructure often limit properties to less spacious dimensions than the Cubes site. The challenge intensifies when dealing with spec property.
“When developers put a spec building on the market, they want the fewest reasons for buyers to say ‘no’ but they also want to come to the market with the most aggressive financial deal,” Montgomery said. “Depending on if the property is in a municipality or in the unincorporated county can affect the overall lease rate and operating expenses for a tenant. In some cases, a landlord has to annex into a municipality to connect to utilities.”
Construction at Cubes at Inland 85 cost CRG an estimated $50 per square foot, but financial incentives and location helped shrink the final price tag. The property’s proximity to Inland Port Greer also will help tenants cut transportation costs.
Garrett Scott, Montgomery’s partner, noted that Spartanburg’s economic development team is “absolutely essential when it comes to engaging with the tenant or user to help provide economic incentives.” They also credit a consolidated sewer system to the county’s continued growth.
Spartanburg can extend sewer lines in advance to promote development, while, according to Montgomery, sewer systems in neighboring counties tend to follow development due to tighter budgets.
Montgomery also helped spearhead the South Greenville Enterprise Park, a 745-acre industrial site. He negotiated sewer extension with ReWa and MetroConnects with the help of Greenville Area Development Corp. and Greenville County Council last year. The park is the county’s first new industrial park in 20 years.
Heavy equipment manufacturer Vermeer Co. closed on a 43-acre parcel in December, the first property to be sold in the park. At completion of the 150,000-square-foot plant, the park is expected to bring 25 additional jobs with the potential to pilot thousands more into Greenville County, according to a news release.
“This property without sewer is good agricultural land,” Montgomery said. “This property with sewer is good industrial land. It really is the game changer between ag and industrial land.”
Katherine O’Neill, Spartanburg County’s chief economic development officer and then-county administrator, helped lay the groundwork for sewer extension to the county’s spec developments in 2013 and 2014.
“County council asked me to spend time with the sewer providers in the county, with the county’s water and sewer advisory committee, to make sure that the county had developed service area boundaries so that service providers could more reliably predict where their service areas were going to be,” O’Neill said. “They could then start being more proactive with the extensions of their sewer lines and the capacity at their treatment plants.”
Financial incentives like fee-in-lieu-of-property-tax agreements also help make Spartanburg sites competitive for speculative developers and users by stabilizing tax liability while business starts to take off. Larger buildings, such as the Cubes at Inland 85 projects, are more likely to qualify for these types of incentives.
“What that does for the county is job creation and (it) creates an environment where a user would put more investment into that building, in machinery and equipment and upfitting the building,” Sox said. “We are extending the tax base for the county and creating quality jobs.”
The past year’s prosperous speculative market follows large-scale spec successes in the county such as the sale of a 362,774-square-foot distribution center in Spartanburg’s Flatwood Industrial Park to Contec Inc., an industrial cleaning manufacturer, in 2018. At its construction in 2015, the building was one of the largest spec properties in South Carolina, according to Cox.
“I think that it really speaks volumes to the area’s business climate. Spartanburg County really has a history of being a place where people want to do business and we compete hard on a global market to maintain that,” O’Neill said.