Panelist: ‘Not a lot wrong’ with Charleston hospitality market
November 14, 2013
The panelists at an Urban Land Institute South Carolina event this morning made it clear that the hospitality market in the Charleston area is strong. One panelist even called it “one of our golden eggs.”
A panel of five Charleston-area tourism and hotel development professionals did speak about a need for more rooms in the area, but the general consensus was that the market is healthy.
There are 1,500 new hotel rooms planned for the Charleston peninsula in the next 18 to 24 months, according to the ULI.
“We have a healthy market now. People forget that we went a number of years without building any new projects,” Robert Clement, president of real estate firm Clement Crawford & Thornhill Inc., said. “The projects will go up and down.”
Clement said that strong hotel market is only a partial reason that Charleston has been rated a No. 1 city by Conde Nast magazine for the past three years.
“We’d like to take credit, as hotel developers, for it, but that isn’t the case,” Clement said. “If you say you’re from Charleston, the reaction is ‘I want to go there.’ That’s because of what everyone does to market Charleston. Everyone in Charleston is pushing. It’s impossible to measure that value.”
Panel moderator Larry Spelts, director of asset management for Charlestowne Hotels, said he sees the power of the Charleston market often. He said he has been personally acquainted with four hotel projects in the area since 2009.
“The conventional wisdom in our industry has been to show a stabilization in the third year, meaning you’d expect to perform at market by the third year,” Spelts said.
But he said all four of those projects were absorbed quickly into the market, hitting their stabilization numbers in the first full year of operations.
Duane Parrish, director of the S.C. Department of Parks, Recreation and Tourism, said there are few negatives when it comes to hospitality in Charleston, noting that the friendliness of citizens is incomparable.
“There’s not a lot wrong in this market. Charleston is one of our golden eggs,” he said. “It’s a great place to live, to visit, to buy.”
Perrin Lawson, deputy director of the Charleston Area Convention & Visitors Bureau, brought up one of the few issues that he believes must be improved in order to maintain the No. 1 status. He said adding another anchor hotel at the Charleston Area Convention Center in North Charleston is a pivotal next step.
“Finding someone to fund a full-service hotel of roughly 400 rooms at the convention center is going to be difficult. That would change the dynamics of what we can do in the convention market,” Lawson said. “It’s a privilege to live in this area. In reality, we’re not going to be No. 1 forever. We’ve been in the top 10 for a long time, so it’s more about focusing on the staying power of being high on the list.”
Demolition has started and pilings are being driven, but the ground-breaking ceremony for one of downtown Charleston’s most ambitious redevelopment projects today officially launched the long-awaited Midtown project.
Officials with Regent Partners of Atlanta and Charleston-based CC&T Real Estate Services along with other dignitaries grabbed ceremonial shovels at 556 King St. to turn some dirt, officially kicking off the $80 million hotel and retail complex on 2.4 acres at King and Spring streets.
The project will include a 10-story, dual-branded Hyatt House and Hyatt Place hotel with 304 guest rooms, retail shops and a seven-story, 403-vehicle parking deck, which the city will eventually own. All told, Midtown will include four new structures and two renovated buildings for a total of 433,000 square feet.
“We are excited about this ground-breaking, but we look forward to its completion,” said Robert Clement of CC&T Real Estate Services, a partner in the project with Regent Partners of Atlanta. “We haven’t made any money yet.”
The developers expect construction to be completed by spring 2015.
Charleston’s massive Midtown hotel to begin rising soon
August 19, 2013
Work begins in earnest this month on a long-delayed construction project on Upper King Street that will be anchored by two Hyatt hotel flags.
Crews are preparing to demolish several vacant structures on 2.4 acres at King and Spring streets as the $80 million second half of the Midtown redevelopment project gets rolling. Preliminary test pilings are already underway.
A 10-story dual-branded Hyatt House and Hyatt Place hotel with a combined 304 guest rooms and ground-floor retail space along King will begin taking shape on Aug. 26, said Reid Freeman, president of Atlanta-based Regent Partners, a partner in the long-planned project with CC&T Real Estate Services.
It’s scheduled to be completed in March 2015, said Robert Clement, president of Charleston-based CC&T.
The project will include four new buildings totaling 433,000 square feet. Two existing structures on the site will be saved.
In addition to the 232,000-square-foot hotel, a seven-story parking garage with 400 spaces will rise on an adjacent parcel.
Freeman said the group decided to go with a dual brand of Hyatt because it’s looking to capture different types of guests. The hotels will have separate lobbies. Hyatt Place will be the bigger of the two, with 191 rooms.
Midtown, which originally included the parcel where the 200-unit Elan Midtown apartment complex is nearing completion, will be one of the largest redevelopment projects in downtown Charleston, Clement said.
“For the longest time, King Street has needed this bookend,” he said.
Evening Post Industries, The Post and Courier’s owner, also has plans for that rapidly changing area of the city. It owns about 12 acres at and around the newspaper’s headquarters, about a block north of the Midtown site. The company is proposing to redevelop the property into a mix of new residential and commercial uses, but no plans have been approved.
Charleston room boom spurs new rules on hotel size and location
One of the biggest changes calls for extending the city’s 50-room limit on new lodgings from Calhoun Street north to the Septima Clark Expressway.
The proposed revisions also would eliminate hotel zoning in certain areas along Meeting and St. Philip streets to prevent intrusion into nearby residential areas.
But an exception to the proposed limits has raised concerns from the preservation group that has pushed for the new restrictions. And some hoteliers worry about the impact of the updated regulations.
The proposals won’t halt hotel development on the peninsula. The major projects that are either underway or previously approved aren’t affected. Those include the 304-room property scheduled to begin construction soon near King and Spring streets; a 185-room hotel planned for the site of the old Charleston County Library off King; a 165-room hotel coming to upper Meeting; and a 161-room hotel proposed for the former federal building across from Marion Square.
All told, nearly 1,500 new rooms are in the works for peninsular Charleston, many of them smaller projects.
“Anything speculative but hasn’t gotten a permit, this would stop that from happening,” said Tim Keane, the city’s director of Planning, Preservation and Sustainability.
“Our feeling is that the accommodation use is a very important one,” Keane said. “We have to be very protective of it. We think we need to dial back on it a little bit.”
Mayor Joe Riley said he supports the changes.
“You don’t want too many of any one thing,” Riley said. “Hotels are valuable and contribute much to the city, but you want to make sure land is available for other uses. You want to make sure there is diversity.”
He called the revisions “very sound,” adding, “We are thinking long-range.”
The city is proposing an exception to its expanded 50-room zone, which for now affects projects south of Calhoun Street. That provision would allow hotels with more than 50 rooms provided they have at least 20,000 square feet of meeting space and a full-service restaurant. Also, those properties would have to be within the area bound by Mary, King, Line and Meeting streets.
Riley said that serves a useful purpose for visitors and residents because the bigger properties could handle wedding receptions and other civic gatherings that a smaller lodging could not accommodate.
The city last updated its accommodations rules in 1997. A local organization drew attention to the surge in downtown hotel development in the spring by calling for new restrictions. The Preservation Society of Charleston said this spring it was concerned about overbuilding and the impact it would have on the peninsula.
“We are being inundated with hotel proposals, and it’s not healthy for the historic district,” Robert Gurley, the group’s director of advocacy, said in April.
The group is now hailing the proposed expansion of the 50-room cap and the city’s effort to prevent hotels from encroaching on residential neighborhoods.
“We believe this will lessen the impact of traffic and encourage the diversity of uses,” Gurley said recently.
At the same time, the Preservation Society is concerned about the provision that keeps the door open for bigger hotels in the expanded room-cap zone.
“We believe this has the potential to diminish the impact of the 50-room cap,” Gurley said.
Dan Blumenstock, the past president of the Charleston Area Hospitality Association, said he supports the exception to the 50-room limit, but he takes issue with imposing restrictions on hotel sizes with one broad stroke.
“I get very cautious when any government is trying to impose a one-size-fits-all,” said Blumenstock, who is vice chairman of the Charleston Area Convention and Visitors Bureau and manages Fennell Holdings’ Lowcountry Hotels. “Maybe it should be done on a case-by-case basis.
“We are in the hotel business,” he continued. “We are looking to develop and prosper all at the same time. We can develop good brands, good architecture and be an added amenity to the community. One-size-fits-all doesn’t always do that. They are taking a one-size blanket and trying to impose it.”
The more than 100-member hospitality association has not taken an official stance on the issue, because no one from the group has made a request, Blumenstock said. Unless someone does before City Council considers final approval next month, the organization won’t get involved, he added.
Local real estate developer Robert Clement, who is part of a group that is about to break ground on a 304-room, 10-story dual-branded Hyatt hotel at King and Spring streets, said extending the 50-room limit while also allowing larger, full-service hotels strikes a good balance.
“The success of Charleston is blending and making sure you don’t overbuild any one thing in any one place,” Clement said. “You need to make sure you have the right size in the right market and the right quantity.”
Reach Warren L. Wise at 937-5524 or twitter.com/warrenlancewise.
The publication analyzed more than 200 transportation and logistics companies, examining each organization’s public-private partnerships, sustainability initiatives and collaborative projects driven by customers.
For the ports authority, Inbound Logistics noted its truck replacement program that helps drivers by new, more fuel-efficient trucks.
“The port electrified its ship-to-shore cranes and plans to electrify the rubber-tired gantry cranes at the new inland port to protect air quality,” according to the publication. “A new electrified agricultural commodities transload facility will replace existing diesel operations.”
The port was also recognized for its Rapid Rail program, which is used to pair ocean carriers with local truckers who move their freight. The port acts as a dispatcher and has been able to link truckers with outgoing and incoming containers, cutting back the number of empty trips, according to Inbound Logistics.
“Our efforts to reduce emissions through new and upgraded equipment, better fuels and replacing the oldest trucks that serve our port are leading among ports in the region,” said Jim Newsome, CEO of the ports authority, in a news release. “We know that green efforts not only make good business sense, but they are also key to being a productive and responsible part of the local community.”
Look out below: Boeing Co. is bringing the next generation of plane-landing technology to the Lowcountry.
It’s called a ground-based augmentation system, or GBAS, and it’s a kind of global positioning system that new planes like the Dreamliner jets Boeing makes in North Charleston will use to descend safely through fog or very low clouds.
“It’s for the 787 specifically,” Boeing South Carolina general manager Jack Jones said.
Part of the Dreamliner’s auto-landing system, the new technology replaces the previous instrument landing system that’s standard on other planes, Jones said. Boeing South Carolina has been using a portable GBAS for its Dreamliners, but now it’s time for a permanent solution.
The upgrade requires some new ground equipment to be installed near the Boeing South Carolina campus.
Trident Construction notified Charleston County this month that it has begun installing five “antenna bases and mats, underground electrical duct banks, and a pre-engineered shelter to house equipment” near the 787 factory at Charleston International Airport.
“When it does go public, we’ll be one of the only airports that has it,” said Sean Tracey, director of special projects for the Charleston County Aviation Authority, which owns and operates the airport. “Because Boeing funded it, it’s here.”
Deliveries
It’s been more than five months since Boeing South Carolina delivered a 787. For those with short memories, it was right around New Year’s, and it was to Air India.
Since then, the North Charleston plant’s flight line has really filled up.
As of early Tuesday, there were seven jets along the ramp: one painted for Air India, two painted for Hainan Airlines of China and four more unpainted jets, one each for Air India and Hainan, and two for China Southern, according to All Things 787’s tracker chart.
One more South Carolina-built jet flew to Texas over the weekend to get painted.
Representatives of those airlines should soon be coming from Asia to pick up their planes, but as Boeing often says, it’s up to the customers when that happens. Until then, it’s a packed house, inside and out, at the local plane factory complex.
Back in Congress
The Boeing 787 will be the subject of another Congressional hearing today. The House Subcommittee on Aviation will convene at 10 a.m. to discuss “lessons learned” from the 787’s battery problems this year.
Federal lawmakers will hear from the 787 program’s chief engineer and a top official from the Federal Aviation Administration, which grounded the new jet from January through April after a pair of smoky battery malfunctions.
An earlier version of this story misstated how many months it’s been since Boeing South Carolina delivered one of its 787 Dreamliners to a customer airline. It’s been more than five months since the last local 787 delivery.
Boeing seeks factory in Charleston area for engineering, assembly of 737 MAX components
Boeing Co. is looking to open a new factory in the Charleston area by this time next year to assemble engine components for its 737 MAX jetliner, while planning for an expansion that could nearly triple the size of the building.
The company began soliciting bids from a small group of real estate developers and landlords for the proposed plant about a month ago. It would house engineers and assembly workers for the 737 MAX work it is bringing to the Lowcountry.
The firm that wins the job will have to work quickly — Boeing wants to it to be completed by next June, according to its request for proposals.
The company said it needs a site that can accommodate a 220,000-square-foot building with 300 parking spaces and have enough land to expand the structure to 600,000 square feet and 700 spaces. For perspective, Boeing’s centerpiece final-assembly building at Charleston International Airport is 1.2 million square feet.
Boeing South Carolina spokeswoman Candy Eslinger confirmed the factory search but declined to say how many workers might be employed there.
“On May 9, Boeing issued a request-for-proposal … to select landlords/developers for a potential 737 MAX inlet engineering and assembly facility in (the) local area,” she said in a statement. “We have begun soliciting bids at this time because of the potential lead times for permitting, design and construction.”
Expansion plans
Boeing’s North Charleston operation has been dedicated to the 787 Dreamliner, but that’s clearly changing — and fast.
In late March Boeing announced plans to concentrate half of its information technology work in three places, one being North Charleston, over the next few years.
A month ago the company said it was bringing 20 workers here to do inlet work for the 737 MAX, work that is done by an outside supplier for the 737 Next Generation now in production.
And a week ago Boeing announced plans to establish new centers for commercial aircraft engineering design and propulsion in South Carolina.
Together, they demonstrate the Chicago-based aerospace giant’s commitment to diversify away from its historic stronghold in Washington state, in large part by building its operations here.
This week was the first time Eslinger confirmed that the Charleston area will handle not only engineering of the 737 MAX nacelles, which include the circular inlets and carbon-reinforced composite pods that encase the engines, but also their assembly.
Though the company hasn’t said as much, the expandable new factory could be the promised propulsion center, according to Saj Ahmad, a London-based analyst with strategicaeroresearch.com, or even where Boeing builds the composite wing for its upcoming 777X jet.
“After all, SC is a centre for composite technology engineering excellence and there is the capital, labour and infrastructure and skill to make those wings there,” Ahmad wrote in an email Thursday.
Boeing has committed to assembling the new 737 MAX in Renton, Wash., where it makes the 737 NG now, but hasn’t said yet whether it will make the 777X in Everett, where it does 777 final assembly now.
Boeing did specify in the solicitation that the new local factory site would have to be within 20 miles of the 787 Dreamliner campus at the airport.
The company wants to finalize the lease by July 31. Offers are due Monday.
Investing in S.C.
The 737 MAX is a fourth version of Boeing’s best-selling, single-aisle passenger jet. The plane has amassed more than 1,000 orders since its launch in August 2011.
One difference from older versions of the 737 is that the MAX’s larger engines will cut fuel consumption and emissions by as much as 13 percent over today’s most fuel-efficient single-aisle airplanes, according to Boeing.
Other features include an aerodynamic, split wingtip that will produce less drag.
First delivery is scheduled for late 2017.
Boeing employs more than 6,000 workers at four factories in North Charleston that work on the 787.
The company recently committed to investing another $1.1 billion and creating 2,000 more jobs in South Carolina in exchange for $120 million in state money that can be used for land purchases and infrastructure work.
Charleston County also has agreed to reduce Boeing’s tax burden through a “fee-in-lieu” deal, and to spend $80 million of the fees Boeing will pay on road improvements around and between its factories.
Boeing also is poised to buy 320 acres from the Charleston County Aviation Authority, a deal that’s under review by the Federal Aviation Administration.
Reach John McDermott at 937-5572. Reach Brendan Kearney at 937-5906.
SC Ports Finalizes $1-Million Land Preservation Program
June 25, 2013
FOR IMMEDIATE RELEASE
June 25, 2013
SC Ports Finalizes $1-Million Land Preservation Program
Close to 1,000 Acres Under Conservation Easements as Part of Navy Base Mitigation
Charleston, SC – Nearly 1,000 acres of environmentally and historically significant properties in the Cooper River watershed are being permanently protected, under a $1-million land preservation program by the South Carolina Ports Authority (SCPA). The effort is part of the SCPA’s $12-million environmental and community mitigation package related to the new container terminal under construction at the former Navy Base in North Charleston.
“As the port grows and thrives, it is vital that we continue to be a productive component of the local community,” said Jim Newsome, president and CEO of the SCPA. “That is accomplished both through the jobs and opportunities afforded to our neighbors through the maritime community, and also through efforts like this that enhance the Charleston region overall.”
In all, three properties totaling more than 967 acres are being preserved through the SCPA plan. Protection of the largest tract, the 824-acre Buck Hall Plantation property, was finalized last week.
Buck Hall is located on the west branch of the Cooper River adjacent to Mepkin Abbey. The property includes 375 acres of wetlands that will be preserved, free of further development, in perpetuity.
Additional properties now under conservation easements through the SCPA funds include 22 acres at the St. James Chapel of Ease in Goose Creek and 122 acres at Brickyard Plantation, which is located on the east branch of the Cooper River at the upper stream of Quimby Creek.
The SCPA partnered with the Lord Berkeley Conservation Trust to identify and acquire the properties. The property owners each have signed agreements with the U.S. Army Corps of Engineers and the South Carolina Department of Health and Environmental Control, placing their properties under conservation easements.
Additional components in the SCPA’s $12-million mitigation plan included a $1 million contribution to protect the 126-acre Morris Island site as a public space for future generations, a five-year collaboration with EcoHealth Alliance on aerial surveys of right whale migrations and a $1-million partnership with the South Carolina Department of Natural Resources SCORE (South Carolina Oyster Restoration and Enhancement) program to restore approximately five miles of oyster reefs in the area. Elsewhere in the harbor, the SCPA will be recreating a 22-acre tract of tidal marsh on the southern end of Drum Island.
In addition to the traditional environmental mitigation activities, the SCPA, in coordination with the City of North Charleston and neighborhoods surrounding the new terminal, is funding $4 million toward education and job training programs, an affordable housing trust and other community initiatives.
The new terminal at the former Navy Base is currently the only permitted, new container terminal under construction on the U.S. East and Gulf coasts. The facility, at build out, will boost the Port of Charleston’s container capacity by 50 percent.
About the South Carolina Ports Authority
The South Carolina Ports Authority, established by the state’s General Assembly in 1942, owns and operates public seaport facilities in Charleston and Georgetown, handling international commerce valued at more than $63 billion annually while receiving no direct taxpayer subsidy. An economic development engine for the state, port operations facilitate 260,800 jobs across South Carolina and nearly $45 billion in economic activity each year. For more information, visit www.scspa.com.
‘Charleston Doing its Part on 787 Ramp,” Credit Suisse declared.
“Southern Comfort Drives our (Stock Price Target) to $118; Reiterate Buy,” Citigroup opened its note to investors.
Jefferies & Co. stated, “2.6 Million Square Feet Make a Big Difference.”
Those were some of the reactions from Wall Street analysts after visiting the Lowcountry for Boeing’s annual investor conference two weeks ago. After more than a year of hearing company executives tout the progress of the North Charleston 787 Dreamliner plant, the financial experts who cover the company finally got to see it for themselves.
As the headlines of the resulting research notes would suggest, they liked what they saw and heard.
The analysts bought the good-news message Boeing has been selling. And based on the apparent health of the local factory complex and other encouraging updates, many advised their clients to buy shares of Boeing.
In making its recommendation, the Goldman Sachs team wrote: “Charleston looked great.”
“The facility has been completely transformed and is in excellent condition and well managed,” the analysts, led by Noah Poponak, wrote in a May 22 note. They added that it “has a lot of upside to total production.”
Howard Rubel of Jefferies said the plant eventually could contribute 15 percent of Boeing Commercial Airplanes’ revenue, which was $49.1 billion last year.
“It might be only 3 percent of Boeing’s property and 6 percent of Commercial Airplanes’s floor space today, but the 2.6 million square foot plant and the 6,000 employees in North Charleston … are creating a positive difference for the company,” Rubel wrote.
Fresh insights
The Post and Courier sought the analyst reports and received 11. They confirmed much of what Boeing already has made public or has been speculated previously, from the maturation of the aft- and midbody factories in North Charleston to Boeing South Carolina’s huge growth potential.
But the notes also included fresh insight into the local plant at an opportune time. The experts weighed in a month after South Carolina approved a $120 million bill to help Boeing’s “Phase Two” expansion and less than a month before the biggest aerospace event of the year, the Paris Air Show, where the company is expected to formally launch the 787-10X double-stretch Dreamliner.
Among the insights:
The local final assembly factory is scheduled to be making three 787s per month by the end of 2013, the highest rate announced so far, but already has machinery in place to make five per month.
The aft- and midbody factories have shipped their first 787-9 extended Dreamliner fuselage sections to the West Coast 787 plant in Everett, Wash., and more are in the works.
Analysts believe Boeing could be making 12, 14, or even 16 787s per month by 2017, with the North Charleston final assembly line contributing seven of those.
And one analyst estimated the overall cost per hour in North Charleston is 30 percent to 40 percent lower than what the company pays its 787 workers in Everett.
Improved
Once the “bottlenecks” of the 787 program, the aft- and midbody factories are producing their pieces for every 787 at a rate of seven per month, analysts said. That’s a vast improvement from when Boeing bought the plants from Vought Aircraft and Alenia Aeronautica in 2009.
Most investors who were in town for the conference had never toured the North Charleston campus. For Deutsche Bank, it was that team’s second visit in about a year, and they reported they were “happy to see” two prior production snags had been addressed since their last tour.
Rubel of Jefferies agreed, saying “new processes have enabled the company to get ahead of the next rate increase.”
“The company has built a bit of a buffer, eliminating a pinch point in production,” he wrote.
Both Rubel’s report and the Credit Suisse note offered additional up-to-the-week details about where the component factories stand.
For example, Rubel and Credit Suisse’s Robert Spingarn said the first aft fueslages for the longer 787-9 recently were completed and were to be shipped to Everett for final assembly. Spingarn also said 787-9 final assembly will begin in North Charleston next year. A Boeing spokeswoman declined to comment on the analysts’ comments but confirmed the 787-9 parts are now in Everett.
The Credit Suisse report also noted Boeing South Carolina is saving time and money by building some parts outside of the plane instead of inside before installing them, “reducing costs and speeding flow times.”
Quite a production
In final assembly, there was some disagreement about what rate the team is turning out finished jets. Boeing generally doesn’t break down the production rate between its plants in North Charleston and Everett.
According to Credit Suisse, Charleston is now producing 787s at a rate of one a month and will ramp up to 1.7 per month this summer; Goldman Sachs put the rate at “slightly less” than two; and the Jefferies’ report, published May 23, said, “today it’s beginning to produce two B787s per month.”
Rubel noted major savings in final assembly, saying workers recently installed a wing so perfectly “that it saved 150 pounds in weight.”
“This efficient assembly process underscores the potential of the company’s South Carolina operation,” he said.
While Boeing’s highest announced production goal is 10 per month by year’s end, with three coming from North Charleston, more than one analyst noted the local final assembly plant can handle more.
“Charleston final production is tooled for 5/month with floor space for 7/month,” according to the UBS team led by David Strauss.
Ken Herbert of Imperial Capital predicted the facility could get to seven per month in 2015.
“While difficult to quantify, we believe that the potential labor savings from increased volume out of South Carolina is substantial,” Herbert wrote in a May 24 report. “We believe that while the initial 787s coming out of the Charleston facility … are taking longer on a per unit basis, the overall cost per hour is 30 percent to 40 percent lower than what the company pays in Everett for 787 production.”
In an interview, Herbert said he based that estimate on factors such as wages, benefits and the cost of living.
Rubel of Jefferies said he assumes Boeing will be making 12 787s per month by 2017.
Herbert was even more optimistic. He wrote the company has the capacity to build 17 of the jets per month and could be planning to “ultimately hit 14 or 16” per month by 2017 if suppliers can keep up. He said later that he based those predictions on the size of the order backlog, the capacity of the two final assembly plants and the “desire by the company to maximize deliveries of the aircraft in as timely a manner as possible.”
Credit Suisse agreed there is an “upside” to Boeing’s stated production goals, but it added that going beyond 10 per month “would be more challenging in the near-term given space constraints” and the need for a second autoclave, or high-heat oven, to cure composite fuselage sections.
Parallel plant
Boeing already is expanding its aft-body, midbody and paint facilities, as well as upfitting offices in the final assembly building. The analysts also cited Boeing’s pending purchase of some 320 acres across International Boulevard from its factories as the basis for more growth.
Herbert predicted Boeing eventually will make more than seven 787s per month in North Charleston and that “the Charleston facility is gearing up for much more than just the 787.” He did not elaborate.
Asked in April if Boeing South Carolina was on track to become the East Coast version of the Everett operation, plant boss Jack Jones said, “You’ll never mirror Everett.”
The analysts weren’t so coy. Doug Harned of Sanford C. Bernstein & Co. put it plainly: “The Charleston facility is being set up as a parallel operation to the Everett facility.”
As if on cue, Boeing announced Friday it’s establishing new centers for commercial aircraft engineering and propulsion at its up-and-coming South Carolina campus.
Boeing establishing engineering design center, 737 MAX propulsion operation in South Carolina
Originally dedicated to making 787 Dreamliners, the North Charleston operation is now poised to grow in size and scope of work.
The latest boost came Friday when Boeing announced that it is establishing new centers for commercial aircraft engineering design and propulsion in South Carolina. It’s another indication of Boeing’s long-term plans in North Charleston and its intentions to diversify beyond its commercial aircraft stronghold in Washington state.
The local engineering center will be one of three, with the others in Washington and California. In March, Boeing announced that it would take a similar approach to information technology, establishing “centers of excellence” in North Charleston, the Seattle area and St. Louis.
The announcement of the propulsion operation, which will work to enhance the performance of future jets beginning with the 737 MAX, comes weeks after the company said it is bringing 20 workers here to do engine inlet work for the new version of that best-selling single-aisle jet.
The meaning of the moves is not hard to discern, according to one longtime Boeing analyst.
“It’s part of a pattern that emerged with the establishment of 787 Line … in Charleston and the continued acquisition of land,” Scott Hamilton, of Issaquah, Wash.-based aviation consulting firm Leeham Co., wrote in an email Friday. “It’s clear for all to see that Boeing is going to make Charleston a major aerospace cluster.”
Richard Aboulafia, another veteran aviation analyst, agreed, but according to his reading, beefing up engineering in North Charleston isn’t necessarily a negative for the Seattle area.
“It’s an endorsement of South Carolina, absolutely, it’s an endorsement of in-house engineering, but it’s not a shift of current engineering capabilities away from Puget Sound,” said Aboulafia, vice president of analysis with Teal Group in Fairfax, Va.
The announcement comes a week after Boeing held its investor conference in the Lowcountry, where its executives hinted at such shifts. The statement Friday said the moves help “lay the foundation for increased competitiveness” as Boeing strives to meet the “unprecedented demand” for commercial airplanes.
“With these changes, we are structuring Boeing’s engineering operations to support that growth, reduce business risks and to consistently provide the products and services our customers expect,” Mike Delaney, Boeing Commercial Airplanes vice president of engineering, said in a statement.
In an email to the North Charleston workforce, Boeing South Carolina top executive Jack Jones said the moves will reduce the “risk of work disruption and/or recovery time from natural disasters, or man-made events, including acts of terrorism” and allow Boeing to cast a wider net for engineering talent.
According to Jones, the company will name a vice president of engineering for South Carolina and provide more details of the work to be done here “in the coming weeks.”
“Growth in the local center will not occur immediately but will be proportionate with work identified that fits with the strategic capability of the teammates based here,” Jones wrote.
The North Charleston operation, which includes about 1,000 engineering employees, now handles production-support engineering for what is made at the site, and will “increasingly move toward aligning the ‘design where built’ philosophy,” said Boeing spokeswoman Candy Eslinger.
“We expect that team will grow over the next several years,” Eslinger wrote in an email, without offering any more specifics about the timeline or number of jobs involved.
The company said the three engineering design centers will operate independently but also cooperatively with one another and an existing site in Moscow.
The new local propulsion operation is part of “a thoughtful, disciplined approach to building our capability and capacity in integrated propulsion system design,” said Nicole Piasecki, vice president and general manager of Boeing Commercial Airplanes Propulsion Systems Division.
“We intend to be the industry leader in this area,” she said in a statement. “The Propulsion South Carolina team will begin with the design and assembly of the 737 MAX engine nacelle inlet and expand strategically on future airplane programs.”
Aboulafia, of Teal Group, said one of the major questions left unanswered is whether production work will follow the engineering to North Charleston.
“Another issue will be how much propulsion engine build-up work will they do there because that’s where you get larger numbers of jobs,” he said.
Last month Boeing announced it would invest another $1.1 billion and hire 2,000 more people in South Carolina over the next eight years in exchange for a government incentives package that includes $120 million in infrastructure funding.
Lawmakers involved in the deal said roughly half of those jobs would be in information technology, and the rest would be engineering and production positions.
The company also is seeking to buy 320 acres across from its existing factories at Charleston International and has options to buy even more land around the airport.
“Over the next generation, I fully expect Charleston to grow dramatically in all Boeing disciplines: assembly, engineering, production of components and research and development,” wrote Hamilton, the Seattle-area analyst.
“The growth in demand, the land constraints in Washington State’s Puget Sound region and the limits on available manpower-expertise in Washington means that Boeing has to expand, and Charleston is it.”
Reach Brendan Kearney at 937-5906 and follow him on Twitter at @kearney_ brendan.