Leasing Velocity Slows As Quality Space Disappears
- Lease activity declined due to the unavailability of quality space currently available.
- Overall market vacancy improved to 12.01% from 12.14% the previous quarter; most activity occurred in Suburban submarkets.
- Net absorption was positive for the fifth consecutive quarter reflective of the consistent demand for office space in Charleston.
- Despite a slowdown in lease transactions, there are still a number of significant requirements in the market for large blocks of space.
- Class A space in excess of 10,000 SF is sparse; only six buildings meet this criteria in the area.
- Office sales market is still hot with several transactions completed in the second quarter.
Second Quarter 2013 Recap
Charleston’s office market continued the first quarter trends of positive absorption, high sales activity and declining vacancy rates, however, lacked the robustness of leasing activity. Second quarter and year-to-date net absorption were positive at 26,433 SF and 38,358 SF, respectively. This is the fifth consecutive quarter of positive net absorption for the market as vacancy rates continued to decline to 11.94% from 12.07% the previous quarter and 14.04% a year ago. This reflected the consistent demand for office space. Overall market average asking rental rates continued to move north to $20.11/SF full service at the end of the second quarter, compared to $19.98/SF the previous quarter and $19.49/SF a year ago. Average asking rental rates for Class A space overall, Downtown and in Suburban submarkets also continued to increase with $25.63/SF full service being the average rate for Class A space in the market.
The drop in activity during the second quarter was due to the unavailability of quality space currently in the Charleston market, as the majority of this space was leased in the first quarter. Recently traded buildings with new owners tuned-in to attracting tenants, are doing just that. Both Ashley Center and Portside Center are office assets that were mostly vacant at the time they sold. Both buildings have since been largely re-tenanted within six months to a year.
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