Charleston Needs More Office Buildings
- The flurry of activity that started postelection provided momentum and a positive outlook for the office market in 2013.
- Both Downtown and Suburban markets do not have sufficient product in the pipeline to meet demand.
- Corporate tenants are demanding quality space as they continue to grow and expand.
- Developers are prepared and ready to develop new product.
- Opportunities exist for development, but developers must act quickly to beat the competition and lock in land costs.
- New development will occur in Suburban markets, such as Summerville, where most of the residential growth is taking place.
- Future Suburban office buildings will be strategically planned in mixed-use developments or as part of a corporate campus setting.
2012 Market Recap
2012 was a moderate year for the office market. It was an election year – a “wait and see” year – as many companies vetted out options, but held off executing any agreements. Limited notable transactions occurred in 2012; most transactions consisted of renewals along with a few smaller transactions of tenants relocating to larger and better quality spaces.
Activity in the office market picked up again toward the end of the quarter. Pent-up demand created by the election and a few big announcements ignited a spark in the office market at year-end; giving it a positive outlook for 2013. These announcements included Boeing’s purchase of the SCRA Research Center, SPARC’s plans to build a new office campus, and Benefitfocus’ expansion into their existing building. Technology and defense sectors continued to be key drivers in the Charleston office market.
Even though the market’s performance was soft in 2012, Charleston’s vacancy rates have consistently decreased each quarter over the last two years; a trend seen in both Downtown and Suburban markets, and in overall and Class A markets. The overall market vacancy rate decreased to 13.42% at year-end 2012 from 17.42% at year-end 2010, Class A vacancy rate decreased to 9.62% from 14.95%, and Charleston’s CBD is the tightest it’s ever been with Class A vacancy rates at 2.55%, compared to 9.87% two years ago. These low vacancies indicate the office market is in need of new product immediately to secure future growth.
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