This is one of those market dynamics that’s been working in favor of sellers for several years now, and I don’t think it’s going away anytime soon.
Building new commercial space in the Carolinas is absurdly expensive right now. Land, site work, materials, labor, permitting. All of it. And that’s created a situation where existing buildings, even older ones that aren’t anything special, are genuinely valuable because replacing them costs more than buying them.
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Property Condition: If your existing building is in good condition with solid tenants, you have an advantage over new construction projects. -
Occupancy and Lease Terms: Strong leases amplify your advantage vs. speculative new buildings with no tenants yet. -
Market Saturation: Has your submarket been overbuilt with new construction? If so, your existing stabilized building is even more valuable. -
Tenant Stability: Can your tenants stay long-term, or are they likely to churn? Tenancy stability is your edge over projects that haven’t leased yet.
The numbers
New construction for a basic flex or industrial building runs $130-150/SF all-in right now in most Carolina markets. And that’s before you factor in lease-up time, which could be 12-18 months before the building is generating stabilized income.
Seller Advantages Right Now
- Existing buildings deliver income immediately; new projects are 2+ years to stabilization
- No entitlement risk or timeline uncertainty
- Construction costs remain elevated, making new buildings expensive
- Investors prefer cash flow certainty over speculative new projects
Why New Construction Struggles
- Entitlements take 18-24 months minimum; many fail
- Construction costs 30-50% higher than pre-pandemic
- 2-3 year carry before any income is generated
- Speculative lease-up risk if market conditions change
An existing building with tenants in place might trade at $90-120/SF. Immediate cash flow. No construction risk. No permitting headaches. No contractor delays. No cost overruns.
The math makes it pretty clear why buyers like me prefer existing buildings. And it should make it equally clear to sellers that their properties have more value than they might think.
Where this is most pronounced
Self-storage in Rock Hill is a great example. Building a new climate-controlled storage facility from scratch might cost $80-100/SF depending on the site and the unit mix. Buying an existing one might be $50-70/SF. Even with some updates needed, the existing facility is a better deal for a buyer. And for the seller, knowing that replacement cost is $80+ means your building has a solid floor value.
Related: Self-Storage in Charleston
Related: Self-Storage in Fayetteville
Land in Fayetteville shows the flip side of this. If construction costs drop (which they haven’t, but hypothetically), the relative advantage of existing buildings decreases. For now, though, construction costs are sticky and materials inflation has been persistent.
Flex in Myrtle Beach and along the coast is another good example. The permitting and site work costs in coastal areas are higher than inland. Environmental requirements, stormwater management, wind load engineering. All of that adds cost to new construction and makes existing buildings more attractive by comparison.
What about outdated buildings?
I hear this from sellers sometimes: “But my building is from the ’80s. Nobody would want it over something new.” Actually, plenty of tenants prefer older buildings. The rents are lower. The spaces are functional. The locations are usually better because those buildings were built when land was cheaper and closer to town. A contractor doesn’t care if the walls are tilt-up concrete from 1985 as long as the ceiling height works and the overhead door opens.
The bottom line
If you own a commercial building in the Carolinas, the replacement cost environment is working in your favor. Your building is worth more today relative to new construction than it was five years ago. That’s not going to last forever. Construction costs could moderate. New supply could catch up to demand. If you’ve been thinking about selling, the window is open.
Seller takeaway
If you own an existing commercial building with solid tenants, you’re sitting on an advantage right now. New construction can’t compete on timeline or cost. Call Roth Capital at 704-600-3839 to talk about capitalizing on that edge.
Give me a call. 704-600-3839. I’ll show you the math on your specific building.
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