The Columbia, South Carolina, office market began to feel the effects of the national economic recession during the first half of 2009, posting negative absorption of 145,614 square feet. The overall occupancy rate fell from 84.72% at year-end 2008 to 82.02% at mid-year 2009 for all classes of office space combined. Although the U.S. entered into a recession nearly 18 months ago, the Columbia office market started to feel the negative impact in the real estate sector during the first six months of 2009.
A significant portion of office space that was vacated during the first six months of the year was vacated by national corporate tenants that downsized. The Columbia office market also experienced an increase in tenants vacating space that remained under lease, which resulted in 122,979 square feet of available sublease space at mid-year 2009. This sublease space will create additional competition for landlords looking to attract or retain tenants during the second half of 2009.
The Class A office market experienced the greatest impact of the recession during the first half of the year, as national tenants occupy a large percentage of Class A space in the Columbia market. During the first six months of 2009, the Class A market experienced 92,893 square feet of negative absorption plus an additional 43,210 square feet of sublease space was added to the market. The decline in occupied space caused a reduction in average asking rental rates from $19.18 per square foot at year-end 2008 to $18.97 per square foot at mid-year 2009.
Although the market experienced a downturn during the six months prior to mid-year 2009, the Central Business District demonstrated exceptional resistance to the weak economy. The market has long relied on economic diversity, but given the fact that two of the fundamental building blocks of our local economy, the South Carolina State Government and the University of South Carolina, experienced budget cuts due to economic conditions, one would have expected the office market to experience a significant downturn as well. This, however, was not the case. Strength of local office tenants created resilience to the negative impact caused by the national economy.
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