2004 Mid-Year Office Market
The Columbia office market declined in the first half of 2004 as a result of a weak job market in 2003 and the first quarter of 2004. Overall occupancies declined to 78.9% as of mid-year 2004, down from 81.1% at the end of 2003. Class A properties performed the best, with an 84.5% occupancy rate, while Class B and Class C properties were the weakest at 75.5% and 77.2%, respectively. Columbia’s office employment is now beginning to improve, adding more than 3,000 jobs during the 12-month period which ended May 31, 2004. As a result, the outlook for the office market for the remainder of the year is much more optimistic.
The office market experienced negative absorption of 62,535 square feet in the first half of 2004. This was fueled by a large drop in occupied space in the CBD’s Class C market. However, absorption was strong for Class A space in the CBD, totaling over 200,000 square feet, much of which was attributed to the completion of Meridian, Columbia’s newest high-rise office tower.
Overall, speculative construction has been dramatically reduced across the Columbia area, as the prospects of filling new space are weak. Most projects that are under construction or in the planning phase are small, ranging from 5,000 square feet to 10,000 square feet.
The suburban markets improved slightly during the first half of 2004. As of June 30, 2004, occupancies stood at 76.3%, up from 73.6% at year-end 2003. Demand in the suburban market has been weak over the past few years, as most tenants have shown a preference for space in the CBD. Suburban Class A occupancy was at 78.5% at mid-year 2004, compared to 79.5% at year-end 2003. In the coming twelve months, occupancies will recover, but it will take some time to see a sizable shift in market fundamentals.
Central Business District
The most positive developments in Columbia’s CBD have been the completion of Meridian in April and the announcement that First Citizens Bank plans to build a 170,000 square foot building on Main Street. Occupancies dropped to 81.7% at mid-year 2004, down from 89.7% at year-end 2003. This was a direct result of new space added to the market that was in the lease-up phase. Class A occupancies were at 87.0%, while Class B space was 81.8% occupied. Average CBD rental rates surpassed $16.00 per square foot, up substantially from $15.14 per square foot at year-end 2003.
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