The commercial real estate market in Columbia is composed of four core sectors: industrial, office, retail, and multi-family apartments. With Columbia’s relatively stable economy due to the underpinnings of state government, Fort Jackson, and the University of South Carolina, the commercial real estate market has seen steady growth. One in five workers in the Columbia area is employed by some form of government. This is 40 percent higher than the national average, which gives Columbia some economic resiliency during a downturn but also means it lags behind other comparable Southern cities in private sector growth. In the fourth quarter of 2022, employment grew 1.8 percent year over year, which equates to 7,200 jobs. The unemployment rate at 3.1 percent is below the national average of 3.5 percent as of the end of 2022.
The industrial market benefits from Columbia’s geographic location in the center of the state with the intersection of three interstates crossing the area and connecting it to some of the largest metro areas in the Southeast. The continued growth of e-commerce will only enhance Columbia’s strategic importance for logistics and fulfillment processes. The Amazon fulfillment center and the UPS regional distribution hub are clear examples of the viability of Columbia’s location. The Columbia industrial sector is experiencing a 3.5 percent vacancy rate and saw 2022 rent growth of 11.6 percent.
Manufacturing also contributes to the Columbia industrial sector. Mark Anthony Brewing’s recent plant added to established manufacturers such as Meridian Brick and China Jushi. Life sciences is a promising area of growth exhibited by Nephron Pharmaceuticals’ $215 million expansion, which will create 250 jobs.
The Columbia office sector is experiencing mixed results; while the vacancy rate is 9.7 percent lower than the national average, it is one that has risen more than 3 percent in the past few years, resulting in a negative absorption rate at the end of 2022. Vacancy is mainly concentrated in the central business district where large national corporations such as Aflac, Prisma, and Colonial Life have put their office space on the market. Other large corporations, Centene and Aetna, have closed their physical offices altogether — the insurance industry as a whole has put significant portions of their office space on the market for sublease. Columbia, however, is attractive to many businesses, with the expansions at Amazon as an example. Small to mid-size companies, particularly locally or regionally headquartered businesses, have generated leasing activity primarily in downtown Columbia. Robinson, Gray, Stepp & Laffitte moved into 28,000 square feet in The BullStreet District. Rents are rising at 2.4 percent with the average rental rate at $21/sq. ft. Office construction, most notably in the The BullStreet District, continues, which is one of the largest redevelopment projects along the East Coast. CapGemini in the First Base Building at BullStreet is another great example. While it is a large international corporation, it has expanded its footprint in the building and continues to hire qualified graduates from the area.
For the retail sector, 2022 started with positive leasing and absorption activity but cooled by the end of the year. The retail vacancy rate was at 3.7 percent by the end of the fourth quarter in 2022, which is low by historic standards. Although Columbia has a low average retail rent of $16/sq. ft. compared to Charlotte or Charleston, the population and job growth are not as robust. Nevertheless, the University of South Carolina continues to grow with more than 30,000 students and, in combination with the steady employment of state government, creates investment and development opportunities for the retail sector. Approximately $323 million was invested last year in retail development. Retail rents increased by 5.2 percent year over year, and a lack of new construction has maintained a rental rate growth above the national average. Columbia is becoming more business friendly, and some large corporations have come or expanded in recent years, such as Capgemini, Amazon, and Mark Anthony Brewing, making a positive impact on the local retail footprint.
Retail construction has slowed with 98,000 square feet delivered last year, and 79,000 square feet under construction. The retail construction contraction is a result of lingering effects of the pandemic’s “halt” on retail construction, supply chain issues, and high construction costs. One of the largest is a 60,000 square foot conversion of an auto dealership into a Floor & Decor retail center in St. Andrews. Most projects have been under 10,000 square feet, such as Starbucks stores and a Clemson Road location leased by East Bay Deli. Projects under construction include a 15,000 square foot retail space at the 4 West multifamily project in West Columbia. Columbia currently has an average cap rate of 7.9 percent for retail space, which has brought investors into the market seeking yield. Two examples of recent sales are a 25,000 square foot strip center off Broad River Road in Irmo for $4.1 million and Richland Mall, which sold for $18.6 million. You might make reference to the planned retail development happening at BullStreet to demonstrate that the retail sector is growing and investors/developers are bullish. Young workers want to “live, work, and play” in an area where they can easily access all of those things.
Columbia continues to see apartment construction with some notable projects. At the former Jim Moore Cadillac site, a 250-unit luxury apartment is under construction that will have a bike shop and pet spa. The Standard at Columbia, a 247-unit apartment building for students on Assembly Street, will be available in August. In the next three years, 3,700 beds are scheduled to come online for student housing. Another planned apartment development is Midtown at BullStreet, which will have 90 attainable apartments scheduled for completion in the fall of 2023. Attainable housing is defined as housing affordable to those within the median household income of $47,416 in the Columbia area. Along with apartments, hotels have been going up, and one planned for Five Points is a 120-room boutique hotel, which will also have 10,000 square feet of retail space.
The current state of Columbia’s commercial real estate market is one of steady but not accelerated growth. This has been the case for many years, which on the one hand has provided stability and continuity but on the other has not experienced the benefits of vibrant growth. Columbia will always have great unlocked potential with its attributes of location, state government, natural resources, and academia. As local leadership becomes more focused on unleashing this potential, business activity and population growth will increase resulting in greater commercial development.
Research data for this article was obtained from CoStar, a global leader in commercial real estate information, analytics, and data driven news.