The Columbia, South Carolina, office market continued to grow during the first six months of 2008. As the vitality of the national economy remained in question, the local market continued to expand absorbing 68,419 square feet of office space from December 31, 2007 to June 30, 2008. This expansion in the local office market, coupled with growth in local employment, demonstrates the long-term stability of the Columbia economy.
Projected numbers through the first five months (January through May) of 2008 show that service-based employment in Columbia, South Carolina, increased by 1.62%, adding 5,100 jobs to the local market. Even in a time of a credit crunch and falling stock prices in the financial sector, the local market has thus far weathered the storm.
As service-based employment continued to expand in the Columbia market, office occupancy increased from 85.71% at year-end 2007 to 86.58% at mid-year 2008. In addition to an increase in occupancy, the market also experienced a significant increase in average asking rental rates over the first six months of 2008. Average market rents rose from $14.89 per square foot at year-end 2007 to $15.43 per square foot at mid-year 2008.
The 3.6% increase in rental rates is the most significant across-the-board increase experienced in recent years and is indicative of both political and economic forces that are now impacting the Columbia market. In 2007, the South Carolina State Legislature revised the state property tax structure, allowing for a point-of-sale assessment at full sales price, thereby increasing property taxes for commercial properties which are sold. Additionally, rising energy prices are affecting all aspects of building operating costs, from heating and air bills to the costs associated with maintenance workers providing site visits. These two factors have worked in tandem to increase required rental rates as landlords look for ways to recoup increasing operating costs.
Columbia’s Central Business District (CBD) absorbed 37,721 square feet during the first half of 2008, bringing occupancy up by nearly one full percentage point to 87.39% from year-end 2007. Along with this increase in occupancy came an increase in development activity. The new Gervais & Main project, which was in the final pre-construction stages at mid-year 2008, will be fully occupied upon completion. Additional development activity in the CBD has also continued to take shape, with several developers seeking commitments from anchor tenants prior to the start of construction.
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