Columbia Office Market Improves

Market Summary

The Columbia office market began to improve in the second half of 2004 following almost eight quarters of decline resulting from a lack of job creation and due to newly constructed office space remaining unleased. As the job market improved in Columbia in the last two quarters, absorption of office space in most of the Columbia markets also began to improve. Restrained construction is now providing a window for absorption to bring the market back to healthier times. Overall occupancies improved from 78.1% as of mid-year 2004, to 81.1% at year-end 2004. Ironically, this is the same occupancy as of year-end 2003. Class A properties are performing the best, with an 85.5% occupancy rate, proving that corporate America is again expanding.

The suburban markets improved slightly during the second half of 2004. As of December 31, 2004, occupancies in the suburban market improved to 76.5%, up from 73.6% at year-end 2003. Although leasing activity increased in the suburban market, positive gains were offset during the second half of the year as some downsizing of tenants unexpectedly placed additional space on the market. Suburban Class A occupancy was 77.9% at year-end 2004. This low occupancy level was a result of newly constructed office buildings in the market still in their initial lease-up period. However, as of year-end 2004, activity in the suburban Class A market was very strong.

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