Charleston Regional Business Center
A Perfect Blend of Location, Product and Timing

[ By Landon Wyatt ]

As shipping continues to migrate from the Pacific routes to the Atlantic, Charleston will continue to grow as a strategic entry point for goods entering the U.S. markets.

Whether you’re talking about the explosion of imports from the Pacific Rim on the West Coast or the flood of goods flowing through the Panama or Suez Canals to the East Coast, today’s global economy has created unparalleled opportunities for developers serving the needs of industrial space users in the Southeast. In recent years, in an effort to diversify inbound locations for contingency, improve regional market efficiencies and avoid west-to-east rail congestion, a growing number of U.S. shippers have begun to look at secondary port markets in the Southeast as viable inbound distribution points.

Logistics is a growth industry. In fact, it’s the new manufacturing for a distribution- driven economy. The extraordinary growth of global trade and the resulting demands on transportation infrastructure have created a demand for new and efficient logistic strategies. Real estate and strategic site selection have become keys to effectively serving the needs of this growing sector of the economy. This has opened real estate opportunities at thriving ports with the necessary infrastructure, like Charleston, South Carolina, where growth in demand from shippers and distributors is fueling strong fundamentals for real estate developers.

With several storefront and automobile parking locations, each building in CRBC can be divided for use by multiple tenants, and the buildings’ interiors can be constructed to suit each tenant’s requirements.

The Port of Charleston has been witnessing a considerable amount of activity as a direct result of evolving logistics patterns in the global economy. Many importers with a traditional preference for using a U.S West Coast port are looking for alternative ports and routes for their cargo, particularly for imports arriving from Asia. Reasons for the shift in interest are due to congestion and labor concerns at West Coast ports, consolidation of rail lines across the U.S. for pass-through cargo, and the growing demand in the Southeastern U.S. driven by new retail stores and homebuilding.

The Charleston Regional Business Center (CRBC) location is positioned to take advantage of Charleston’s growing port, a phenomena driven primarily by the five billion dollars in goods currently flowing through the Panama Canal and to satisfy the expanded regional demand from the growing consumer markets of the Southeastern states. Asian shippers are also finding it increasingly cost effective to utilize the Suez Canal and warehouse inbound goods on the East Coast since this route has no restrictions on today’s super large container ships. As shipping continues to migrate from the Pacific routes to the Atlantic, Charleston will become a strategic entry point for goods entering the U.S. markets.

Assembling the CRBC and Finding the Right Partner
In 2005, Childress Klein began looking for sites in Charleston to take advantage of these solid fundamentals. The CRBC was an existing site, originally master planned by The Beach Company. Typically, Childress Klein would not look at a site that was being developed by another developer, but The Beach Company was in the process of selling their existing industrial buildings as well as the remaining land for new development in the park. Of the sites in Charleston, the acquired land at CRBC was strategically located in the first drayage zone and was the closest undeveloped, large footprint space offering near-immediate access to the Port of Charleston. All of the other available sites for new development were a considerable distance to the Port, thus the proximity to the Port became the deciding factor in moving forward with acquiring the final vacant parcels at the CRBC. The Foreign Trade Zone location capitalized on the property’s close proximity and short drive times to Charleston’s key port terminals (Wando Welch, Columbus Street, Union Pier, North Charleston and the new terminal to be added at the former Charleston Navy Yard).

Childress Klein had been working with Rob Toomey at Denver-based Amstar Group, a real estate private equity firm, to identify viable development opportunities for modern warehouse space and brought the CRBC site to Amstar’s attention. Amstar was approached before Childress Klein closed on the land to see if they would be interested on working on this project as a capital source and development partner. A subsequent joint venture was formed and the land purchased to capitalize on the growing demand for space by acquiring the last sizable parcels of prime land in Charleston.

Where Is the Competition?

Located minutes away from I-526 and I-26, as well as the Wando Welch Terminal and the North Charleston Terminal, Charleston Regional Business Center will ultimately offer over 2.3 million square feet of distribution and warehouse space.

When looking at the Charleston market, the joint venture carefully assessed the competitive environment in the area. Analysis showed that the competition close to the port terminals was limited to a small amount of second-generation product currently in the market. These older facilities do not offer the modern functionality that the CRBC offers. It’s extremely difficult to find suitable land near the Port, which is why new industrial developments have begun to move farther out. The CRBC offers an excellent logistics location in the market within a modern, attractive industrial park. In fact, other developers in the market offering speculative buildings ready to lease are located in Jedburg, 25 miles from the Port of Charleston terminals. By comparison, CRBC is only four miles from the Wando Welch terminal, offering the Port advantage at relatively the same price. It’s interesting to note that the CRBC buildings compete less with other Charleston product, than with product in Savannah, another growing Southeastern port complex for large distribution users.

Charleston Regional Business Center Strategic Attributes
The Charleston Regional Business Center is a 261-acre property on the Cainhoy peninsula of Charleston. Childress Klein and Amstar are developing the final 62 interior acres within the CRBC into speculative Class A warehouse/distribution center space. Totaling over a million square feet, the four buildings will feature modern design formats supporting strategic inbound and outbound logistics and distribution operations. Design plans provide for creating superior, modern cross-dock, front-load, and/or rear-load facilities that will include large truck courts with extensive on-site trailer parking, 24-30 foot clear heights and ESFR sprinkler systems. The first two buildings (Building I and Building III) completed construction in December 2007 with significant leasing activity on both buildings.

Building I is a 351,000-square-foot, cross-dock building and Building III is a 112,000-square-foot, front-loading building. Building II, another 351,000-square-foot building, is in the final planning stage. In addition, Childress Klein recently acquired another 16 acres of raw land that will eventually house a 250,000-square-foot building (Building IV.) Construction on Building IV will not commence until after Building II is delivered in late 2008. Building IV will be very similar to Building I and II, but with front-loading capabilities.

If You Build It, They Will Come

The cross-dock format of CRBC I offers the opportunity to have many dock doors and ample parking space for empty trailers at both the front and rear of the building.

The Port of Charleston has been able to attract developers by showing them that the need for space exists. The import market has spurred growth in business at the Port, as well as growth in the demand for space. Over the past few years, Charleston has suffered from a lack of contiguous blocks of Class A warehouse space close to the shipping terminals. Availability has continued to tighten as new construction has failed to keep up with the increasing space demands and old facilities are not readily adaptable for new logistics users. The growth of international commerce and increasing import activity through the Port of Charleston have fostered a growing demand for distribution center space within close proximity to Charleston’s port terminals. It is a perfect example of “If you build it, they will come.” Targeting port users, Childress Klein wanted to develop buildings that would best serve their needs. These types of buildings are typically cross-docked with as many dock doors as possible, trailer parking space, high clear heights and wide column spans to allow for racking and storage of materials more efficiently. Typically, warehousing and logistic companies have an ideal racking layout to get their goods through the facility in the most efficient way. With the racking layout comes the positioning of several elements within the warehouse such as lighting, the office area, trucker access and check-in facilities. Childress Klein leaves our buildings in “shell” condition, (four walls and a roof) with no interior systems yet in place. In a shell building, all of the interior improvements can be tailored to fit the individual company’s needs.

Working Together, Everyone Wins
The South Carolina Port Authority and the Port of Charleston have been excellent partners in the effort. The Port’s terminal space and crane capacity have grown to meet the increasing volume of TEU’s entering the East Coast of the U.S. through Charleston, and the Port’s productivity is among the highest in the industry. In addition to the terminals and cranes, the Port needs the modern distribution space necessary to serve the shipping companies and shippers whose needs are fueling the area’s growth. The CRBC venture is helping the Port of Charleston by providing that much-needed inventory of available space. Of course, the job growth associated with the companies filling these buildings also adds to the economy of the area.

Childress Klein and Amstar were very fortunate to recognize early the explosive growth of the Port of Charleston, but we are certainly not alone in this view. Since our first closing on the land, we have witnessed a number of larger, institutional industrial developers and owners securing large tracts of land that could almost double the size of Charleston’s industrial stock in the future. We all believe that the market in Charleston will continue to grow in a consistent, well-measured manner. Both Childress Klein and Amstar are bullish on the Charleston market and the continued growth of the CRBC.