Commercial Department: Spotlight: South Carolina: November 2015

By Bill Conroy, managing editor, Scotsman Guide Media | bio

South Carolina is a small state with a global reach

The economy of the South Carolina has sprung back from the recession on the strength of its expanding manufacturing and tourism sectors.

The state boasts plants operated by automakers such as BMW and recent arrivals Volvo and Mercedes-Benz Vans. Other manufacturers with a major presence in the state include Michelin, Continental and Giti, which help to make South Carolina the top tire producer in the nation. South Carolina’s tourism sector represents an $18 billion market and is propelled by the historic, leisure and recreational attractions to be found in popular travel destinations such as Charleston, Hilton Head Island and Myrtle Beach.

South Carolina’s low-cost labor is among the big selling points for luring companies to the state. But that also means consumer buying power in South Carolina doesn’t pack the same punch as in other states. South Carolina’s gross domestic product (GDP) grew by 2.2 percent in 2014, on pace with the national GDP growth rate. But its per capita personal income ranked near the bottom in the nation, at 48th, this past year, and was only 80 percent of the national mark of $46,129. The state’s unemployment rate, although it declined from its recession high of nearly 12 percent, still hovers at about a percentage point above the national rate.

South Carolina also is a magnet for foreign investors, with overseas companies employing nearly 116,000 people in the state, representing 7.6 percent of all private-sector employment — the second-highest share in the nation. The major sources of that foreign investment, according to a recent report by Wells Fargo, are Germany, France, Japan and the United Kingdom.

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Charleston office market

The economy of the historic port city of Charleston, founded in 1670, is fueled by tourism, manufacturing and shipping. Charleston is on pace to become South Carolina’s largest city and its office market is booming. The overall office vacancy rate is at an eight-year low, and average Central Business District asking rents for Class A properties are pushing $32 per square foot, exceeding rents in other office markets in the Southeast such as Atlanta; Charlotte, North Carolina; and Tampa, Florida. Net space absorption tallied 216,005 square feet in this past second quarter — and 452,591 square feet year to date through this past June — while the overall vacancy rate dropped to 7 percent.

As further evidence of the robust activity in Charleston’s office sector, Cushman Wakefield reports that 150,000 square feet of speculative space was delivered in this past second quarter. A number of new office projects are in motion in the city as well, according to Colliers International.

Focus: Industrial space

The auto-manufacturing sector in South Carolina is red hot and expanding, which is helping to ratchet up demand for space in the state’s industrial real estate market. Vacancies are declining and rental rates are rising even as new space comes on the market, according to a report by Colliers International. The state is home to a BMW plant that employs 8,000 people. In addition, Mercedes-Benz Vans and Volvo Cars each have announced plans to open new plants in South Carolina.

South Carolina also is home to a sizeable aviation industry, including a Boeing Co. plant that assembles fuselage parts for the company’s 787 Dreamliner passenger jet.

All this manufacturing heft is translating into a tightening market for industrial space. The statewide vacancy rate in the sector stood at 8.5 percent as of mid-year 2015, down from 9.3 percent a year earlier. Some 1.7 million square feet was absorbed by the market on a net basis in this past second quarter alone, Colliers International reports.

Unemployment

South Carolina’s labor market was hit hard by the recession. Over the course of the economic downturn, some 130,000 people lost their jobs. The unemployment rate had soared to 11.7 percent within a few months of the recession’s end, according to the U.S. Bureau of Labor Statistics.

But South Carolina’s unemployment rate has exceeded the national rate since 2001, with a few brief exceptions over the period. As of this past July, the state’s unemployment rate was 6.4 percent, compared with the national rate of 5.3 percent. On a positive note, between the end of the recession and July of this year, the state added about 201,000 jobs.

Sources: Boeing, Brookings Institution, Charleston County, City of Columbia, City of Greenville, Colliers International, Cushman Wakefield, Economic Futures Group, Federal Reserve Bank of Richmond, Federal Reserve Bank of St. Louis, Greenville Online, JPMorgan Chase Co., South Carolina Department of Commerce, Spartanburg Area Chamber of Commerce, The Post and Courier, The State, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics, U.S. Census Bureau, University of South Carolina, Wells Fargo