Charleston Office Market Poised For New Construction
The Charleston, South Carolina, office market saw a net absorption of 480,000 square feet for 2011. Demand for quality space significantly exceeded supply as half of the absorption was Class A space. The market, consisting of over 11.5 million square feet, ended the year with a 13.86% vacancy rate and stabilized rental rates.
Class A vacancy diminished below 10%, a decrease from 12% at mid-year 2011. Corporate tenants in search of Class A space found options unsatisfactory due to the limited choices of available space in each respective submarket. In addition, quality tenants competed for specific spaces and buildings in the marketplace as they became available. The combination of low vacancies, stabilizing and slightly rising rents and competition for space signifies a market poised for the construction of new buildings.
The downtown submarket, consisting of nearly 2 million square feet, reported 90,000 square feet of net absorption, of which 82,000 square feet was Class A space. This activity was prompted by the expansion and relocation of law firms.
Vacancy levels and rental rates for Class A space in the Charleston CBD reached record levels. Class A vacancy levels were at 5.87% at year-end 2011, a decrease from 6.07% in the prior quarter, leaving tenants very few options for space. Class A rental rates reached an all time high of $35.00 per square foot full service for first generation space, indicating that Charleston is ready for new product.
Demand for Class A and large blocks of contiguous space continued to increase in the CBD, evidenced by 25 Calhoun, a 63,000-square-foot, Class A, multi-tenant building delivered in 2011. A Holder Properties and Durlach Associates development, it is Charleston’s first LEED Core & Shell Certified office building. 25 Calhoun has the top rental rate ($35.00) in the market and was near full occupancy at the time of delivery in the fourth quarter. The success of this project can be attributed to its conventional style, timing (this is the first large multi-tenant office building to be constructed on the peninsula in about five years) and limited choices for large blocks of contiguous space downtown.
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