Developers delve into status of DI commercial real estate
Recently, Daniel Island has experienced a shift in respect to vacant office space. What was a tight market just a year ago has quickly loosened due to changes in tenants and new buildings being constructed.
With a total of approximately 265,000 square-feet of office space currently available on the island, developers are feeling the pressure to fill the vacancies, explained Pete Harper, principal broker for Lee & Associates.
“There’s 100,000 feet in T-Mobile, 30,000 feet at 146 Fairchild St., they still have 33,000 feet up at Dockery’s that’s available,” said Harper. “The Blackbaud building over there by the soccer stadium has two floors that are out there for sublease. There is a lot of space on Daniel Island. It’s 15-20 percent vacant right now. There is a lot of pressure to get some office tenants to fill some of these spaces on Daniel Island. I think it’s going to be pretty competitive.”
Although there is a vast amount of office space available, Mike White, broker-in-charge for Charleston Industrial, LLC, explained that the “red hot” market that currently exists on Daniel Island will draw new companies to the area.
“The island continues to attract new companies and active executives seeking an office close to their home here,” said White. “While several large bulk vacancies will be available later this year, we see this more as an anomaly than the norm. It’s coincidental that Blackbaud is relocating some workers into their beautiful new HQ building at the same time the T-Mobile and Dockery’s building came online.”
While there is a large amount of office space across the island, some developers are nearing the end of some of their major projects.
Daniel’s Corner, a multi-use building developed by S.L. Shaw & Associates located at 145 River Landing Dr., is nearing completion, with only one space remaining to be leased, explained partner Phillip Manchester.
“Completion is right at the end of the second quarter, with one exception,” said Manchester. “We have one remaining space in the entire building—it’s actually the space that overlooks the courtyard, that overlooks the water (pond). It’s pretty prime space but it’s all we have left. It’s about 2000 square feet. We do have several people looking at it - it is the only available space in that building. It’s kind of the cherry on top. It’s a cool space.”
One of the tenants planning to set up shop at Daniel’s Corner is Critical Mix, a company that, according to its website, “creates insights that drive business decisions with easy, collaborative tools to access global target audiences, program engaging surveys, and visualize results.” The other tenants are Wagenmaker and Oberly LLC, a law firm; Colonial Life; S.L. Shaw and Associates; Hinchey Murray & Pagliarini LLC, also a law firm; and Dr. Rebeca Zechmann’s dental practice. The first four of these tenants will be moving in May 1.
According to White, their property at 225 Seven Farms Dr. is also nearing full occupancy, with only one suite remaining.
“[There are] several strong prospects considering leasing it,” said White. “We may also decide to partition this space for single executive offices, for which demand remains high across the island. Our other spaces at 259 and 245 Seven Farms remain 100 percent occupied.”
In regards to retail space, however, vacancy is extremely tight across the island, added Harper.
“There’s currently very little existing retail space that’s available,” said Harper. “There is 1.65 million square-feet of total office and retail space currently on DI.”
Of that, 1.41 million square-feet is office while 240,000 square feet is retail, he added. Approximately 21,645 square-feet of retail is currently available (91 percent occupied) while 265,000 square-feet of office space is available (81 percent occupied), explained Harper.
Central Island Square, the neighborhood center developed by Lee & Associates that features over 28,000 square feet of street front retail located on Island Park Drive, is nearly finished, with the final two spaces currently going through deal proposals, explained Harper. New tenants that have signed leases include Tacos and Tequila Cantina, an upscale Mexican restaurant, and Beech Poke, a Poke bowl restaurant out of downtown, a restaurant that is nearing the end of the deal and one other tenant that did not want to disclose their identity at this time.
“It’s probably going to be another month or two before that tenant discloses anything for confidentiality reasons,” said Harper. “We have one other restaurant that’s close. It’ll probably be next week when we announce it. We have New York Butcher and the chiropractor that we’ve already announced. There are two other deals and there are only two spaces left. One of them is about 4600 and one is about 2400 square feet. They both have pretty solid proposals out on that that I think will be going to lease fairly quickly. That would finish it up.”
There is an additional 27,000 plus square foot space intended for office and retail planned for the lot beside Orlando’s and Holy Cross Church, though construction will not be completed until the fourth quarter of 2019, explained Manchester, whose company is developing the property.
“A big part of it is making sure we have enough tenants for the project,” said Manchester. “And we do have several interested parties…none of which I can announce in terms of names, but some pretty substantial users. There are several that are currently on Daniel Island and one or two that are looking from off Daniel Island.”
With the market that exists on Daniel Island and in the surrounding area, Harper explained that once available, the open office and retail space will not remain on the market for very long.
“Daniel Island is so well located in the overall Charleston market, that I believe the space we have available will be absorbed in two to three years and we will be back to being a tight market to find retail and office space,” said Harper.
Manchester’s company also developed the successful commercial property at 125 River Landing Drive. He believes the market here continues to be strong.
“But it’s more about our belief in the overall island,” he said. “It has a lot of elements that are wonderful elements that you can see being very sustainable for quite some time. If you’re going to develop property and do what we do, it checks a lot of the boxes. All of them.”
And Manchester and his partner not only do business on Daniel Island, they live here.
“There are numbers that support that everything is going really, really well here,” he added. “There is also the gut feel part of it…We both believe in it. The proof is in the pudding for us.”
Although confident about the future of the island, White, who also owns Bin 526, remains apprehensive about the state of parking as development continues.
“The (Daniel Island) master plan was brilliantly executed,” said White. “…Development here is not for the faint of heart. Parking remains the major challenge to both retail and office properties on the island. The parking codes were written to encourage community-wide shared parking and more dense development. Regrettably, we lack a central parking garage facility that could serve the commercial center and also handle crowd events like the Volvo (Car Open).