South Carolina July 2022- Key Take Aways
Corey Memmott – Tax Credit Marketplace. Closing 20 more projects by end of the year. Development and banking partners seeing rate increases at 100-200 basis points. Likely will continue to monitor that. Developers with institutional capital are going strong especially in the Multi-Family and Industrial sectors.
Kyle Snipes – Harper General Contractors. Hiring as fast as they can. They do a lot of self performance. Need mutli-project managers especially on the distribution projects. One off projects are starting to slow down especially in the community and non profit sectors. Steel pricing is stabilizing. If you are trying to find electrical gear its’s nuts – 50-60 week lead time. They have deep relationships with subs, but it’s still taking 52 weeks to get product. Bullish on the future – there likely will be a bump by the end of the year.
Mark Cooter – Cherry Bekaert. Introduced Interns Taylor Edwards and Rachel Jackson. Many of the institutional investors are not slowing down. High net worth individuals are also not slowing down and are tolerant with rates. Like everyone else, they are looking to hire people.
Mark Fletcher – Bohler. Lot of developers with large sites 300+ acres – 50% of those developers are starting to sell off larger parcels – willing to flip because of cost of construction. Data centers are in demand – supply is 4 years behind – demand will go well into 2023-2025. Microsoft is building another 3M sf west of Charlotte. Cold Storage remains strong – replacing infrastructure (70% of existing is 30+ years). Massive uptick in multi-family. Big shift on Corporate HQ – politics, quality of life costs and talent…relocation decision drivers. Advanced manufacturing is very strong – SC, NC, AL, GA, TX, VA as ranked – SC is #1 for advanced manufacturing. Industrial sector 70% is spec construction, but for Data Centers only 15% spec. One trend is Tier 1 and 2 suppliers for the auto industry are being required to be ‘next door’ to avoid supply chain issues (components could be walked across the street so to speak).
Megan O’Neill – Wyche. The end of the SC legislative session, comprehensive tax cut of 2022 – increases exemption for industrial manufacturing – decreases tax rate from 10.5% to 6%. Still recommend companies getting FILO (fee in lieu) agreements. Local counties do the millage – they could increase those to inch it back up. State government is giving a credit to the counties to try to even it out. Other benefits of getting it set contractually is no rollback on taxes. Also, there is an option for Super Filo for major companies coming in – with major investments and big jobs. Great incentives for companies coming in. Real estate was already at 6% just brought manufacturing in line – makes SC competitive with NC. Approval process for special source revenue credits – go thru process so go ahead and get it contractually locked in. Statute is based upon the capital investment amount. You can also do FILO’s for Multi-family projects.
Alita Webster – Young Office. They are looking for employees – PM, admin, sales, design. Very busy – not seeing any slow down. They are seeing product come in – but without electrical components. 1/3 is in education sector – redoing classrooms, etc. 1/3 health care and 1/3 manufacturing.
Susan Donkers / Kornelia Kostka – Global Location Strategies. Kornelia heads up research – global data focus. Select USA conference – 80 countries represented and there were more corporate prospects present than normal – there is still tons of interest in US. New sector – vertical growth facilities. ASHRAE got serious with dry disinfection.
Will Giambalvo – Gallagher. Dealing with replacement cost keeping up with inflation. Hurricane season driving up costs – convective storms, wildfires – more of those events. $111B in insured losses in 2021. $81B – was wildfire, tornados, convection storms (not hurricanes). Used to be programs for specialized projects – but wasn’t insuring to full replacement costs. Several programs have gone insolvent. Costs are getting ready to go up. Getting valuations – most carriers are agreeable are allowing you to increase values if you are underinsured over a few years. Some deals on smaller side are dying due to rate increases. MF still strong, single family, townhomes are still going.
David Lewis – Context Design Group. Packaging projects is a huge class of projects going strong. Automotive is strong too – EV trying to sort itself out, especially with batteries. Suppliers are going into the next gen vehicles coming to Tier 1 and 2 suppliers – making changes for new vehicles coming. Many doing additions and modifications.
Andrew Porio – Tax Credit Marketplace. Institutional capital seems to be holding up. Hospitality developers are back active. Municipalities are focused on downtowns and getting employees coming back.
Josh Lonon – Wyche. Explosive growth downtown Spartanburg. 2 new downtown hotels to be announced. Rumors on project in the Grain District – 10 acre site behind AC Hotel. PFAL – 40 mile connected trail system – one of largest in the southeast – will be supplemented on an abandoned rail line – negotiations are underway. From a development standpoint, once they get in, development explodes along the side of these paths.
Scott Williams – Aline Capital. Debt/Equity and investment sales. Pipeline is largest it’s ever been – but deals are hard to get done. Is hearing a lot of the big guys are on the sideline until 4th Quarter. Massive headwinds in insurance.
Alan Ballew – Realti Trust. Commercial real estate and foreign capital. Cleanup work from fallout from covid matters that went into foreclosure. Seeing Electrical issues as well getting parts etc. Private capital still aggressive. Working with several developers from NC looking to get into SC – MF, senior housing. Hiring talent is a challenge. Capital is still aggressive for this market. Dallas, OK, CO – lots of challenges. Immigration and placement of foreign capital – hinges on infrastructure projects.
Alex Dmyterko – Streams Development. Develops MF and self storage. Starting first SS project – started in June. STOWE. Also doing apartments – 250 units in Anderson that is under construction. Underwriting 6 months ago at 3.5% interest rates – now at 5-5.5%. Development equity. Add inflation to that. Really impacting cash flow. Have 2 projects getting ready for next year – MF – but must watch cost of capital. Money plentiful, just getting harder to get deals done.
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