Vacancy Remains at Historic Lows

Key Takeaways

  • Tight market conditions continue, with historically low vacancy rates. 
  • Rental rate growth is exceptionally strong across the market.
  • Investors purchased several buildings for record prices.

Market Conditions

The vacancy rate at the end of the third quarter of 2017 was 7.4%, down from 7.9% at the end of last quarter. Market-wide, 63,000 square feet were absorbed, with no new buildings added to the supply in the quarter. The average asking rental rate at the end of the third quarter of 2017 was $26.92 per square foot per year full service. Since the third quarter of 2016, the overall rental rate had increased 14.3% from $23.55 per square foot per year full service. 

Downtown Conditions

The vacancy rate in the downtown submarket was 6.03% at the end of the third quarter. The full-service average asking rental rate in the submarket reached $34.81 per square foot per year full service at the end of the third quarter, up from $30.83 per square foot per year full service in the third quarter of 2016. Class A space saw even higher asking rental rates, with an average of $36.85 per square foot per year full service, an increase of 2.5% from a year ago. The only building under construction is Courier Square, an 88,000-square foot office, which is fully preleased by Greystar. 

Suburban Conditions

The suburban vacancy rate dropped to 7.76% at the end of the third quarter from 8.06% the second quarter, with nearly 27,000 square feet absorbed. Most of the positive absorption occurred in the Upper North Charleston submarket. The suburban full-service average asking rental rate has increased 7.6% from $22.55 per square foot per year full service to $24.27 per square foot per year since the third quarter of 2016. Class A space increased 4.4% from $25.98 per square foot per year full service to $27.14 per square foot per year full service over the same period. Construction and redevelopment remained strong in the suburban markets with a total of four buildings under construction.

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