The Columbia, South Carolina office market surpassed most expectations during the first half of 1998. The office market surged forward sustaining the momentum achieved during the second half of 1997. Occupancy levels improved during the first six months of the year with strong absorption taking place in certain market segments. Overall occupancy as of June 30, 1998 was 91.6%, up substantially from 89.6% on December 31, 1997. This is the highest occupancy achieved in the Columbia market since official statistics began in 1977. The absorption of 125,000 square feet in this six month period is one of the strongest performances experienced in the last ten years.
The Columbia office market is composed of the Central Business District (CBD) and four submarkets which total approximately 9.5 million square feet. One-third of the market can be categorized as Class A space. The occupancy rate for Class A space at mid year 1998 was 93.0%, unchanged from year end 1997. The most active market within the Columbia area was Forest Acres which experienced almost 70,000 square feet of absorption and increased the occupancy level from 83.8% to 94.7% during the six month period. The St. Andrews market was the second most active market increasing its occupancy from 89.1 % to 94.0%. A detailed review of each submarket can be found in the Market Spotlight section of this report.
Office leasing activity was at a fever pitch for the first six months of 1998. Tenants continue to find it difficult to locate available leasing options within the market. However, the market is now experiencing a substantial increase of new office space with five projects under construction. These new buildings will add a total of 450,000 95%square feet to the Columbia CBD by the end of 1999. Equally important is the fact that rental rates, particularly in the Class A segment, are experiencing sharp increases. Some owners of office buildings have raised rental rates as much as 15 % during the six month period. It is anticipated that rate increases for most other buildings will be implemented during the remainder of 1998 as higher occupancy rates afford owners the ability to raise rental rates.
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