The Columbia, South Carolina, office market experienced what can best be classified as “mixed results” during the first quarter of 2010. There are numerous conflicting market indicators present that cause many to speculate we are in a recovering market while many also believe the market has yet to begin to expand. Economic analysts’ claims that an economic recovery has begun and consumer spending has increased do not necessarily indicate the real estate market has begun its recovery. Yet despite Columbia’s and South Carolina’s historically high unemployment rates, there are strong signals that businesses are beginning to expand once again and hiring may soon be in the forecast.
Lease activity in the Columbia office market was reasonably strong during the first quarter of 2010 with a number of large projects in the market looking for vacant space. Larger users of Class A and Class B space have numerous choices of large blocks of space available in the market. During the first quarter of 2010, the occupancy rate for the Columbia market was 76.1%; a decrease in occupancy from 78.47% at year-end 2009. The loss in occupancy is primarily attributed to the completion of the Main and Gervais office tower in the Central Business District (CBD) which added 180,000 square feet of space to the market. The three occupants of the fully committed tower are vacating 180,000 square feet of space in the CBD ,freeing up space in three separate office buildings. The CBD occupancy rate at Q1 was 73.86% which includes the vacant 420,000 square feet located in the Palmetto Center which remains on the market for sale. Yet, despite the low CBD occupancy rate, with the removal of this one property from the vacancy list, the occupancy rate rises to 82.92%. Owners of CBD properties who control their own parking spaces, or have access to sufficient parking, will see more activity during the remainder of 2010. Pressue on rental rates will cause continued declines, albeit slight declines, on achievable rates for the next six months.
The suburban office markets in Columbia continued to see a less than average amount of leasing activity during the first quarter of 2010. Most office users within the market are looking for aggressive rental rates to lure them away from existing properties or to lure them away from downtown. Although the market has experienced several larger users looking for space in the suburban areas, activity has not significantly altered the occupancy rates as many firms have continued to downsize or even close their Columbia offices.
The fact that there are no significant office projects under construction in the CBD or in the suburban markets indicates the market recovery still has a way to go. With the extreme difficult financing requirements that exist we feel it will be quite some time before any large project will be started. New construction for the foreseeable future may be limited in size and only with selected lead tenants in place.
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