October 15, 2007
Commercial real estate experts show optimism
Panel sees demand, but also rising costs
By Richard Breen, Editor
The first building in the second phase of RiverPlace will have the bounce agency as its lead tenant.
The Upstate can’t completely avoid widespread problems in the subprime lending sector, but the overall feeling of local experts is optimistic when it comes to commercial real estate.
Those were the highlights from the annual Greater Greenville Commercial Real Estate Market Forecast. The Oct. 11 panel discussion at The Poinsett Club was sponsored by the Greater Greenville Association of Realtors, South Carolina Chapter of Certified Commercial Investment Managers, and Carolinas Chapter of the Society of Industrial and Office Realtors.
“It’s a really exciting time to be in retail development and retail brokerage in Greenville,” said Andy Misiaveg, a principal with The Shopping Center Group.
The Charlotte-based firm represents a number of retail chains with stores in the GSA area, including Costco Wholesale Corp., Old Navy, Office Depot and The Sports Authority. Costco opened stores in Greenville and Spartanburg this summer.
“That’s a real testament to the growth and prosperity of this area,” he said, adding the strong opening of Whole Foods Market at Shops at the Point as another example. “They’re just blowing the doors off here.”
The industrial market also looks good, even as the local economy shifts toward high-tech manufacturing and logistics-oriented operations, according to Garrett Scott, president of the industrial division at Johnson Development Associates Inc. in Spartanburg.
“I think you’re going to see a continued influx of knowledge-based manufacturers,” he said.
JDA’s current strategy is to do business in markets with major ports, such as Charleston, or where transportation infrastructure creates intermodal transfer points for goods, such as in Dallas. Having recently sold 5 million square feet of Upstate property, Scott said JDA found a great deal of interest from outside the market.
“The investment community likes this area,” he said.
As Upstate property becomes more expensive, he said, we are coming closer to a time when tearing down functionally obsolete buildings to build anew is financially feasible.Rising prices drew the attention of several panelists, including Phil Hughes, president of Hughes Investments Inc. in Greenville.
“Land prices have gone extremely high,” he said. “Hard costs of construction have doubled.”
That is good news for redevelopment projects, he said.
Hughes is a developer of the mixed-use RiverPlace project along the Reedy River and one of several Greenville property owners pushing for a downtown marketing program. He said the fact that downtown Greenville is such a pleasant surprise to visitors is good and bad.
“We’ve failed to get the word out to where it’s not a surprise,” he said.
One aspect of downtown Greenville that is not a surprise is the condominium boom of recent years. Bryan Blackwood, owner of Blackwood Co. in Greenville, said that since 1999, there have been 24 condo projects, putting a total of 621 units on the market.
It is not unusual to see condos on the market at $300 per square foot, he said.
“Affordability of living downtown is an issue for downtown going forward,” he said.
An answer could be coming in the form of McBee Station, a mixed-use development that includes rental apartments.
“I think there is some pent-up demand for rental property downtown,” Blackwood said, “but that’s going to depend on the rental rates.”
Demand for rentals in general could rise as mortgage requirements tighten in the wake of problems in the subprime lending sector. Dr. Bruce Yandle, former business dean at Clemson University, reported that there are $2.5 million in subprime loans on the books and $1.3 trillion of those are at risk of default.
“We are not significantly and directly affected by it in this region,” he added, however.
Still, Bryson Thomason, president of Professional Mortgage Co. in Greenville, saw a link.
“Some of the same aggressive subprime investors have also been very aggressively investing in commercial mortgage-backed securities,” he said.
He added that a “cleansing” in the lending market will be positive long-term.
"The investors we talked to,” he said, “they still like commercial real estate, still like commercial mortgages.”