Charleston’s Office Market Sees Lowest Vacancy Rate in a Decade
Third Quarter 2013 Recap
The Charleston office market proved strong with companies locking in leases for the limited quality space that was available during this past quarter. The market continued in expansion mode thanks to a quickly recovering housing market, Charleston’s recent national recognitions, and job creation. Overall, market vacancy rates declined for the seventh consecutive quarter; currently at 11.95% vacant, which is the lowest vacancy rate Charleston has seen in the last 10 years. Although total net absorption for the third quarter was soft at 7,581 SF, predominantly due to additional sublease space coming on line and boosting Class A vacancy rates, it was positive, and is a testament to the strength of the market.
Additional sublease space came on line in the third quarter compared to the second quarter primarily due to the consolidations coming from the defense sector. Over 72,000 SF of Class A sublease space was vacant during the third quarter compared to nearly 27,000 SF the previous quarter; the majority of the space being in the suburban markets. While there are some looming vacancies on the horizon and sublease space that has most recently come on line, there are enough larger tenants actively looking in the market to offset the vacancies that have hit the market.
Across all submarkets, the development pipeline remains thin. Many projects are on the drawing board but will not get off the ground until pre-leasing requirements are met. Before year-end, both buildings currently under construction will deliver. 174 Meeting in downtown and Nexton in Summerville will add 30,000 SF and 75,000 SF of speculative space, respectively. Faber Pointe, a class A office development in Lower North Charleston in the Executive Park at Faber Place, delivered in the second quarter. The development remained largely vacant in the third quarter, but coming into the fourth quarter the building will be 90% leased. Larger tenants actively searching and leasing quality office space in the market have the potential to motivate speculative office development.
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