Significant Demand Drives Capital Investments
- Demand for office space in Charleston, South Carolina is strong, contributing to declining vacancy rates, soaring rental rates and capital investments.
- Vacancy rates are at historical lows and rental rates are rising as landlords seek control of the market.
- Construction activity is gaining momentum with several projects under construction and in the pipeline.
- Office-using employment is growing and is at an all-time high with 70,300 jobs in August 2015.
Vacancy Continues to Tighten
An improving economy and job market coupled with above average population growth is driving demand for office space throughout the Charleston, SC office market. All office-using sectors are showing equal interest in the market with users seeking anywhere from 5,000 to over 100,000 square feet of office space. While downsizing was a common trend during the recent economic downturn, companies are once again expanding and expressing a need for larger blocks of office space. Numerous Fortune 500 companies belonging to the finance, insurance and technology sectors, among others, are showing interest with the potential of establishing headquarters in the market.
The overall vacancy rate for the office market was down to 9.4% from 9.9% at mid-year and 11.6% one year ago. Interest is strong, but tenants are limited by the few remaining options for quality space. Leasing velocity was strong throughout the third quarter contributing to a net absorption of approximately 267,000 square feet for the market. The significant absorption is the combined result of two new buildings adding occupied space to the market’s existing inventory and several leases throughout the market.
Central Business District Submarket
Charleston’s Central Business District (CBD) continues to improve and ended the third quarter of 2015 with a total vacancy rate of 10.6%, down from 11.1% at mid-year 2015. Construction recently completed on two downtown projects, Midtown and the Cigar Factor, which collectively add approximately 170,000 square feet of office space to the existing inventory. Growing demand for space in the CBD continues to be reflected in rising rental rates, which averaged $31.75 per square foot per year at the end of the third quarter, increasing significantly from $28.68 per square foot one year ago. Class A and B asking rental rates averaged $34.69 and $30.59, respectively, setting new record-high rates for the submarket.
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