The Columbia office market remained healthy in spite of a weakening economy during 2001. While office markets across the United States have been severely impacted by the weakening economy and the collapse of the technology sector, the Columbia office market has been only slightly affected. Nationally, corporations continue to reduce expenses and conserve resources by reducing office space. Yet, by the statistics of the Columbia office market at year-end 2001, the market remains relatively healthy with a positive outlook for 2002.
At year-end 2001, the 10.5 million square feet of multi-tenant office space within the Columbia market was 90.4% occupied compared to 93.0% at year-end 2000. This decrease pales in comparison to decreases experienced in many other markets in the Southeast. It is important to note there is a substantial amount of sublease space available within the market. Several large blocks of available sublease space further reduce the overall occupancy rate to 86.0%. Yet sublet space which is available is not being leased as most tenants prefer to lease space directly from owners of commercial properties. Even though the space is available, it has not extensively impacted the market during 2001.
The occupancy rate of Class A space in Columbia at year-end 2001 was 90.9%, a decrease from 94.2% at year-end 2000. The 90.9% occupancy level signifies a relatively strong Class A market in Columbia.
Central Business District
The CBD continued to perform well during 2001 but weakened from the all time high occupancy level of 95.4% at year-end 2000. At year-end 2001 the overall occupancy of the CBD was 90.1%. During 2001, newly renovated office buildings, as well as previously occupied corporate space, were added to the market. The additional space which is largely vacant, coupled with existing vacancies, resulted in a lower occupancy rate than one year earlier.
As a further measurement of the strength of the CBD Class A space at year-end 2001 was 92.7% occupied thereby indicating a strong occupancy base in the Class A market in the CBD. With only one new building of 56,000 square feet currently under construction, the market should maintain or improve this level of occupancy during 2002. The market continues to see expansions of service-related companies and law firms within the CBD. However the slowing absorption rate, coupled with the availability of some sublease space in the CBD, will limit a landlord’s ability to increase rental rates within the coming year.
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