The Columbia office market continued to show signs of improvement over the second half of 2005, with positive absorption of 77,592 square feet. Average rental rates increased from $13.80 per square foot at mid-year to $14.12 per square foot at year-end 2005. Although rental rates increased across the market, there were noted declines in weaker markets.
The Class A office market experienced negative absorption of 4,288 square feet, largely due to downsizing of companies in the Central Business District. In the suburbs, Class A absorption was 66,576 square feet. Class A occupancy for the overall market currently stands at 86.20% with an average quoted rental rate of $17.59 (down from $18.72 at mid-year) per square foot. Class A office space consisted of 2.82 million square feet, or approximately 31% of the overall market.
The Columbia economy continued to perform well in 2005. Job creation in November was up 1.60% over the previous year. Among the highest growth sectors were private services (legal, accountants, etc.) with 4,600 new jobs and government (federal, state and local) with 1,100 new jobs.
The Columbia office market will continue to strengthen in 2006 as the regional economy expands further. The most robust submarkets will be the St. Andrews and Northeast areas of Columbia. As these markets continue to tighten, we should see an increase in quoted rents.
Other market forces, such as rising utility costs and interest rates, will no doubt increase rents across the board. We may see a trend in early 2006 of small Class C tenants moving into A and B space, locking in rates before they rise significantly.
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