Upstate Market Update

Upstate Market "Healthy" Despite Tumultuous 2020

While a great deal of unrest was brought upon the commercial real estate industry in 2020, the Upstate market appears to have “weathered the storm” well. Our region's commercial real estate market was able to make it through relatively unscathed due to multiple factors including a thoughtful approach by South Carolina state leadership as to the degree to which businesses were locked down (or out) during the pandemic; continued in-migration (population growth); a general lack of speculative overbuilding (unlike the 2008-09 recession); and healthy capital markets (most property owners were not overleveraged in March 2020). We experienced a significant dip in transaction volume in Greenville as every major asset class saw a drop of 40-60% in transaction volume (2020 vs. 2019), but surprisingly all asset classes with the exception of retail saw a continued rise in average sales price of anywhere from 2.6% (multi-family) to 5.3% (industrial). This increase came about despite vacancies increasing in every asset class as tenants took a huge pause in executing leases from mid-March through most of the summer of 2020. The Turnover Ratio (transaction value/total market value) for all asset classes dropped below the 4% mark, which many investment experts consider the break point for a “healthy” market. Even the multi-family sector, which over the past five years saw an annual turnover rate of 7-9% in the Upstate, dropped to 2.8%. Interestingly, the office sector was the highest at 3.88%. This was likely due to investors seeing greater opportunity in the sector and more owners needing to sell.