The Columbia, South Carolina office market experienced significant growth during the third quarter of 2007. The total market absorbed approximately 50,000 square feet over this three month period, bringing total occupancy to 86.09% as of September 30, 2007. Of this absorption, 20,000 square feet occurred in the Central Business District and 30,000 square feet of absorption occurred in the suburban submarkets.
As the market tightened over Q3, asking rental rates continued to climb. At mid-year 2007, average asking rental rates across the market were $14.95 per square foot. This was an already significant increase over year-end 2006 rental rates, which averaged $14.38 per square foot. With the availability of quality space continuing to decline, average rental rates across the market could be expected to exceed $15.00 per square foot by year-end 2007.
The St. Andrews market, which experienced little activity over the previous 12 months, saw 10,000 square feet of Class A absorption. The St. Andrews submarket market also absorbed an additional 30,000 square feet of flex-space at the former Wachovia Operations Center.
Job growth in the Columbia MSA continued to climb through September 2007. In the twelve months prior to September 2007, total private employment increased by 3,300 jobs, or 0.90%. In the sectors impacting the office market, service-related industries increased by 5,400 jobs or 1.70%. Government employment is on the rise as well, adding 900 new jobs in the Columbia MSA between September 2006 and September 2007. The only sector that has potentially had a negative impact on the office economy is the construction sector, which experienced a decrease of 1,400 jobs during this twelve-month period. As home sales continue to decline nationally, a downturn in the local market may impact local lending and mortgage operations that currently occupy office space in the Columbia market.
At mid-year 2007, it was estimated that 20% of the office market in Columbia was available for purchase. During the third quarter two major properties, Pinnacle Park and Carolina Center Business Park, were purchased by national investors. As the market continues to tighten over the fourth quarter of 2007, investment purchases from national portfolios should continue as there is very little speculative development currently under construction to provide market competition.
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