January 27, 2015 – Our speaker this week was Chris Fraser, Managing Director of the Charleston office of Avison Young. Fraser is a leader in Charleston’s real estate development community having been instrumental in the development of projects as the Blackbaud campus and Battery Stadium. Fraser has served as President of the Charleston Metro Chamber of Commerce and the Charleston Trident Association of Realtors and has certainly given back to his community having served six years on the board of the Charleston County School District. His years of experience allowed him to present a very timely topic to our club – the market update for the commercial real estate market.
Fraser noted that over 43 people move into the Charleston region every day. With over three-quarters of a million people living in the region already and so many newcomers arriving every day, the region is poised to pass a million residents very soon. While the market downturn in 2009 did hurt commercial real estate in the Charleston region, Fraser noted that Charleston fared better than many other communities and as a result was able to return to growth more quickly and at a faster pace than other regions. The vacancy rate for industrial properties has decreased from over 15% to single digits. Unfortunately much of the remaining vacant inventory is obsolete. The market for office space also shows strength with a vacancy rate of less then 10% and would be even better, but the West Ashley area’s vacancy rate, which is the highest in the region, skews the numbers upward.
As vacancy rates have declined, the market has been able to sustain growth in rental rates. According to Fraser rates now can support the construction of as much as 10 million square feet of office space and 20 million square feet of retail space. In particular Fraser mentioned three areas where development is proceeding. The Nexton development in Summerville, when it reaches its final build out, will be larger than the town of Mount Pleasant. North Morrison Drive on the east side of Charleston will experience growth which will make it unrecognizable to those who know the area today. Fraser expects to see several projects of five to ten stories including living, retail and office space. The Horizon Project located between Lockwood Boulevard and Hagood Avenue is already underway with the phase known as Project Zero – the construction of a 5,000 car parking facility with residential units wrapping around it and overlooking Joe Riley Stadium. Already on the drawing board is the so-called Project 1A with over 350 residential units, parking and a major grocery store. Project 1B will be primarily office space, hopefully housing commercial endeavors spun off from research at MUSC.
Fraser noted that many new developments, such as Nexton and the Horizon Project, allow residents to live, work and play in one area. As an example he said someone living in the Park West community can live, work, dine, shop and have their children go to school from kindergarten through high school and even college at Trident Tech within three miles of their home. Nonetheless, with so much growth and so many new residents arriving daily, Fraser expressed concern that the areas transportation system is already stressed and will only become more congested and over-burdened. Having served as Chairman of the Gaillard Management Association, Fraser knows that when the revitalized Gaillard Center opens it will bring with it the capacity for more convention space than Charleston Place – more than doubling current convention space in Charleston creating yet another stress on transportation.
Returning to the topic of West Ashley, Fraser noted that commercial office space has never really taken off in that part of the region. With so much growth in the residential communities West Ashley, however, he fully expects to see strong retail growth, though what will ultimately become of the Citadel Mall development is currently anybody’s guess.
As can be expected with such a timely topic there were many questions for Fraser from club members. When asked about the ability of the local education system to meet the challenge of commercial and industrial growth, he noted that school districts in all three local counties have partnered with local businesses to create 40 career acadamies where students learn the skills needed to find qualified employment with those industries. As for our regions transportation woes, he noted that the new Sheep Island Road interchange in I-26 is required to be built to federal standards. Apparently those standards require that such interchange connect with US Highway 52 on the east and US Highway 78 on the west. He likened this extension of highway infrastructure to an outer loop much like I-526, though when such a project might be begun and finished is unknown.
— Alex Dallis