Office leasing remained active during 2009 despite experiencing a decline in occupancy from 84.35% at year-end 2008 to 78.47% at year-end 2009. This 454,603-square-foot decline in occupied space can largely be attributed to SCANA Corporation’s relocation from the Palmetto Center located on Main Street in the Central Business District (CBD) to a newly constructed corporate campus in Cayce, South Carolina. This relocation left 420,000 square feet of the 456,000-square-foot building vacant. The building vacancy represents approximately 5% of the total office market and 10% of the CBD.
Average asking rental rates across the market increased from $15.02 per square foot at year-end 2008 to $15.24 per square foot at year-end 2009. Although there was an overall increase in average asking rates, the Class A market experienced a $0.77 decline over this twelve-month period, ending the year at an average of $18.41 per square foot. Average asking rental rates in the Class B market, however, increased from $15.62 per square foot at year-end 2008 to $16.39 per square foot at year-end 2009.
As demand for Class A space diminished, landlords worked diligently to retain existing tenants and attract new tenants, often offering concessions for longer leases and early renewals. While the market shows signs of being a “tenants market”, those who waited to renegotiate their lease terms may have waited too long as landlords can now see an end to the weak economy and may prefer to patiently wait for more attractive terms at the time of lease expiration in the coming years.
Although the CBD experienced the greatest decline in occupancy of Columbia’s submarkets in 2009, there were many positive strides made during the year. Several new tenants relocated from the suburban markets to the CBD, and Columbia’s newest office building, Main & Gervais, neared completion at year-end 2009. This 180,000-square-foot tower will be occupied by McNair Law Firm, Edens & Avant and NBSC. 1441 Main Street also underwent extensive renovations to the lobby and building façade in 2009 in order to reposition the property as one of Main Street’s premier business addresses.
The suburban office markets experienced a significant downturn during the first half of 2009 but rebounded strongly during the last six months of the year, absorbing an annual total of 8,242 square feet and ending the year at 81.03% occupied. This slight uptick in absorption is attributed to out-of-market tenants moving into the Columbia market. The Cayce/West Columbia submarket demonstrated the greatest amount of activity, where positive absorption of 81,515 square feet resulted in an increase in occupancy from 69.45% at year-end 2008 to 84.12% at year-end 2009. The completion of the Southern First corporate headquarters on Knox Abbott Drive added 39,000 square feet to the Class A market in Cayce/West Columbia.
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