The Charleston, South Carolina, office market absorbed 250,000 square feet of space during 2007, which brought the total market vacancy to 13.8% at year-end 2007. The market continued to absorb space over the course of the year, albeit at a much lower rate than previously experienced. In the past four to five years, the market has absorbed roughly 450,000 square feet of space per year. This decrease in market absorption, coupled with the construction of new space in 2007, resulted in an increase in market vacancy from the roughly 12% historically experienced.
Office space on the Charleston Peninsula remained in limited supply over the twelve months prior to year-end 2007, as the total market size increased by only 19,000 square feet. With very limited new construction, the occupancy rate remained the highest in the market at year-end 2007, finishing the year at 94.14%. The Class A market ended 2007 at a 95.13% occupancy rate and commanded the highest rental rates in the State.
Rental rates in the market have increased continuously over the past several years, resulting in a market average of $19.67 per square foot at year-end 2007. Downtown Class A rates averaged $29.00 to $30.00 per square foot, and suburban Class A rates reached a new high of $26.00 per square foot largely due to the amount of new construction occurring in the market.
The new tax change that was implemented in 2007 has pushed a significant burden on both non-personal residential property and commercial properties. As commercial projects are sold, tax rates are increasing by as much as 30% to 40%, which in turn has been passed on directly to tenants.
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