Occupancy rates in the Columbia, South Carolina, office market remained stable during 2008, which is a notable accomplishment given the weakness in the national economy. Although the U.S. has been in a recession for nearly a year, the local market has thus far weathered the economic storm. The office market made very slight gains during the six months prior to year-end 2008. From year-end 2007 to year-end 2008, the office market absorbed 52,373 square feet, contrasting the performance of most metropolitan areas.
Columbia’s Central Business District, comprised of 4.4 million square feet of office space, experienced a great deal of activity during 2008 but ended the year at the same occupancy at which it started, 87.47%. There were numerous relocations within the CBD and even some new companies locating in the downtown area, but late-year business closings created a lack of positive absorption for the year. During 2008, the suburban markets absorbed 43,704 square feet in the twelve-month period ending December 31, 2008. The positive absorption was welcome news as suburban occupancies are typically adversely affected in a weaker economy. Most of the leasing activity occurred during the first half of the year, as the second half of the year brought increased uncertainty. Only the Northeast submarket was able to make significant strides in occupancy, absorbing 23,623 square feet. The Forest Acres submarket remained flat, and the Cayce/West Columbia and St. Andrews submarkets both experienced slightly negative absorption during the last two quarters of 2008.
Average asking rental rates across the market surprisingly increased from $14.84 per square foot at year-end 2007 to $15.03 per square foot at year-end 2008. Average asking rates for Class A properties continued to rise over the course of the year, increasing by $0.52 per square foot in the Central Business District and $0.79 per square foot in the suburban market. The basis for this increase appears to be the result of lower-priced Class A space being absorbed at a quicker pace than other classes of space.
Investment office sales volume during 2008 was volatile as the year started with numerous office investments being marketed for sale. Yet, during the year, only a few sizeable transactions were completed amid the turmoil created by the weak credit markets. South Carolina’s largest multi-tenant office building, Capitol Center, was sold, along with Fontaine Business Center, the Berkeley Building and the Climatic Centre. Given the current state of the credit markets, it is likely that only a few office investments will sell during the next six-month period.
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