Class A Market Tightens
In 2011, the Charleston office market saw a significant increase in leasing activity compared to previous years. A substantial amount of transactions took place providing the market positive momentum entering 2012. Overall vacancy decreased, lease rates increased and tenants competed for Class A space which further increased demand for this product type. As Class A options diminished and vacancy levels reached the single-digits, many proposed developments were revived in anticipation to meet present and future demand.
Activity in the overall market at the end of the first quarter remained the same compared to year-end, however, there were not as many transactions as in the previous year. Overall vacancy rates increased slightly to 14.83%, asking rates increased by $0.20 per square foot on average, and the market reported negative absorption of approximately 53,000 SF. Despite the flat performance of the first quarter, activity is still strong with industries that are key drivers to each submarket looking to expand and/or relocate. New office projects in Downtown, Lower North Charleston and Summerville continued to move forward in response to the market.
Class A space in Downtown is nearly non-existent. At quarter-end, Class A vacancy dropped to 5.12%, down from 5.87% at year-end. Class A asking rates increased to $29.96 full service, up from $29.14 full service. Class A absorption was positive at approximately 7,500 SF. Law firms and technology firms continue to drive this submarket. No new buildings delivered in the first quarter, however, one building is currently under construction. 466-468 King Street, a Class A mixed-use development, kicked off construction when PeopleMatter signed a lease for 14,000 square feet. The project is expected to be completed in 2013.
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