The Columbia economy can best be described in one word — steady. With 20 percent of the workforce employed by the government, Columbia has a strong economic foundation that protects it during economic downturns but that also acts as a drag to more vibrant growth. From 2010 to 2020, the Columbia population grew by 8 percent compared to Greenville, which grew 19 percent, and Charlotte’s 28 percent. The boom experienced by many cities in the South and Southwest has not passed Columbia by, but it hasn’t zeroed in on it either. Times may be changing, however, with new manufacturing plants that have recently opened, such as Mark Anthony Brewing, and new ones coming online such as the Scout Motors plant in Blythewood. The life science industry, with more than 35 facilities, has rapidly become an important industry cluster for the Columbia area. Nephron Pharmaceuticals, the Ritedose Corporation, Bridge to Life, and Rhythmlink International are examples of this burgeoning economic driver. The insurance technology cluster also continues to grow with nationally leading businesses either headquartered here or having significant offices in Columbia. A few of these companies are BlueCross BlueShield, Seibels, Capgemini, Colonial Life, Aflac, and American Specialty Health. As these industry clusters and others progress, Columbia will rely on the government sector less and will grow at a faster pace.
During the past year, the Columbia office sector has shown signs of weakness as office construction has been minimal and the vacancy rate has risen but still remains below national averages. Due to the upheaval in the workplace caused by COVID-19, office space is still adjusting. Several large employers in the Columbia area have reduced their need for office space, which has added to the overall supply. Prices for office buildings and sales activity have been flat. With interest rates remaining high and economic uncertainty prevalent, sales have slowed with $83.5 million closing in the past year. Leasing activity may have slowed but has not stopped. Nelson Mullins committed to 145,660 square feet on Main Street, Southeastern Esthetics Institute leased 40,000 square feet in Elgin, and the S.C. Public Charter School leased 31,000 square feet on Barnwell St. Rent prices have also remained steady as a result of greater supply. Rents average $22 per square foot, which is comparable to Greenville/Spartanburg but lower than Charlotte and Charleston, where rents average $30/square foot.
The Columbia retail sector is experiencing tight vacancy with a 3.2 percent rate that is expected to remain low for the foreseeable future. Even with tight supply, construction has been limited and little new inventory is projected to break ground. Due to these factors, rent growth has accelerated by 4.6 percent. Developers are wary of constructing more space because of the uncertainty of the retail market environment. Consumer trends that have shifted from brick and mortar to the online marketplace have created a damper on new construction. The construction that has taken place is usually in the form of freestanding buildings for tenants such as Starbucks and T-Mobile. Some larger projects that have recently been constructed are the 28,000-square-foot strip center named 168 Wall in Kershaw County and a 14,450-square-foot mixed use space on Forest Drive. Although construction has been slow, sales activity has been high. More than $200 million has traded in the past year with most of the recent deals concentrated in the northeast area. Out-of-state investors have been conducting the majority of deals, such as San Diego-based Realty Income Corp.’s purchase of a portfolio of 181 retail and industrial properties.
The Columbia industrial sector is seeing tight supply with a vacancy rate of 4.6 percent, which is below the national average of 5.9 percent. Pent-up demand coupled with Columbia’s strategic logistical location should open up more construction. At the crossroads of three major interstates, Columbia commands a connectivity to the rest of the Southeast that only a few cities have, such as Birmingham, Nashville, and Atlanta. This connectivity to the port of Charleston and then onto the rest of the Southeast will keep demand high for more construction. Approximately 2.4 million square feet is currently underway, which will expand inventory by 3.2 percent. Due to tight supply, rents on average have increased 7.5 percent over the past year. Submarkets within the Columbia MSA are experiencing even higher increases, such as Richland and Kershaw counties that have seen 10 percent and 9 percent gains respectively. Sales activity in the industrial area reached $161 million during the past year.
Trepidation over the direction of the economy and higher interest rates have slowed sales activity. Cap rates average 8.5 percent in the Columbia area — higher than the national average of 5.95 percent. Notable sales in the past year were the $46.7 million sale of a 497,500-square-foot facility in West Columbia and the 247,000-square-foot facility at 1029 Colite Dr. for $24.7 million.
As home to the state capital and state university, Columbia provides a consistent source of renters for multifamily apartments. Students at the University of South Carolina, state government employees, and soldiers from Ft. Jackson keep a constant flow of renters into the market. Even with the delivery of more than 300 units in the past year, vacancy has remained constant at 8.2 percent due to demand. Rental rates have grown by 3.1 percent, which is above the national average, and suburban markets with more luxury amenities have performed better than the urban core. Areas such as Lake Murray and north Richland saw more demand than elsewhere in the Columbia market. In the past 12 months, $93 million in sales has taken place. Construction of new apartments is slower than either Greenville or Charleston but still steady with a 15 percent increase since 2010. Several new properties have opened in the past year, such as the 252 unit in Wildewood named Ashcroft as well as a 109 unit — the former Masonic Temple — in downtown Columbia.
Although Columbia has not experienced the rapid growth of some of its sister cities within the state, it has grown at a pace that many cities in the country would love to have. The future looks bright with Columbia possessing all the right attributes and ingredients for sustained growth. Emerging companies supporting the Scout plant and EV industry combined with the life science and insurance industries bodes well for commercial real estate expansion and investment.