The Columbia office market improved during the second half of 2002 by posting a positive absorption rate for the last six months of the year. However, for calendar year 2002, the market declined from 90.1% at year-end 2001 to 88.2% at year-end 2002. Even more positive than the mild absorption rate in the preceding six-month period is the fact that the overall occupancy rate of 88.2% includes 160,000 square feet of newly constructed office space during 2002.
Occupancy rates varied greatly in each of the five market areas of Columbia for the 10.5 million square feet of multi-tenant office space. The markets include the Central Business District and the suburban markets of St. Andrews, Northeast, Forest Acres/East Columbia and Cayce/West Columbia. In comparison to other Southeastern cities, Columbia’s occupancy level indicates it is one of the stronger markets in the Southeast. Additionally, the Columbia market has seen a notable reduction in the amount of sublease space during the second half of 2002.
Characteristic of the improving occupancy rates during the second half of the year, 40% of the buildings surveyed at year-end had a higher level of occupancy than they did as of mid-year 2002 while 30% remained the same and 30% had a lesser occupancy rate than at mid-year 2002.
Class A space in Columbia consists of 2,800,000 square feet. The occupancy rate of Class A space at year-end 2002 was 90.4% compared to 89.9% at mid-year 2002 and 90.9% at year-end 2001. This level of occupancy includes 160,000 square feet of newly constructed office space during 2002.
Central Business District
The CBD has weakened considerably from the all time high level of 95.4% at year-end 2000. The occupancy rate as of mid-year 2002 was 90.8% and 88.8% as of year-end 2002. Most notably in the CBD is the start of construction of Meridian, a 350,000 square foot office tower to be completed in the Spring of 2004. With the pending departure of several major tenants in the CBD, occupancy levels are anticipated to decline sharply during 2003 with a further erosion of occupancy levels in 2004, as over 200,000 square feet of speculative office space is completed. The potential exists by the end of 2004 that occupancy levels in the CBD could fall as low as 82%. While rental rates weathered the period of declining occupancy during the first half of 2002, the market experienced a slight decline in rents during the second half of the year.
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