Charleston’s medical office market kept the momentum going in the last half of 2005. Overall absorption remained positive and across the market performance was not due to new practices but mainly to the expansion of existing practices combined with former medical office space being withdrawn from the medical market and converted to general office space. Contributing factors to the expansion of these practices are job growth and population inflow, which have continued driving Charleston’s already significant growth rate. The overall Charleston medical market decreased by approximately 24,000 square feet from 1,878,559 to 1,854,759 square feet. This drove East Cooper’s vacancy rate down from 10.9% to 4.4%, giving East Cooper the lowest vacancy rate in the Charleston market. As Downtown Charleston remains limited in new growth, the market size remained at 284,442 square feet and vacancy remained low at 5.3%. With North Charleston’s addition of medical space to the market, vacancy increased from 4.4% to 5.9% while the West Ashley and James Island submarket had a decrease in vacancy from 9.6% to 8.4%, due to the expansion of existing practices and the formation of new groups.
As development opportunities remain limited Downtown, few Medical Office Building (MOB) projects are either proposed or under construction, other than the Roper Hospital expansion and the MUSC Hospital Replacement Project. The newest Class “A” MOB in the Downtown submarket, 163 Rutledge Avenue, is nearing completion and the first physician practice will take occupancy in March. MUSC’s College of Health Professions occupied the approximately 80,000 square foot Charleston High School project on Rutledge Avenue mid-year 2005, while MUSC’s Hospital Replacement Project continues to progress with steel and tilt concrete structures being erected and altering the skyline forever. The Downtown submarket continues to remain strong with a 94.7% occupancy rate, keeping overall rental rates strong at an average of $23.56 per square foot.
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