Activity in the Columbia, South Carolina, office market continued to show promise of economic recovery as leasing activity expanded into the suburban markets during the second quarter of 2011. The majority of the leasing volume during the previous three quarters was primarily limited to the Central Business District due to the aggressiveness of downtown landlords to attract and retain tenants. During the second quarter of 2011, however, CBD rental rates started to increase for the first time in 18 months, while suburban rates further declined by an average of $0.58 per square foot. This divergence of rental rates between the CBD and suburban markets can be largely attributed to suburban landlords being more aggressive in rental rates to capture tenant activity. Absorption in the suburban markets totaled 37,461 square feet during in the second quarter of 2011.
Leasing activity in the suburban markets was largely concentrated in Columbia’s largest suburban submarket, St. Andrews. This positive absorption is noteworthy because the St. Andrews area had experienced a continual decline in occupancy from the onset of the last economic downturn through the first quarter of 2011. Renewed activity in this submarket signals an encouraging trend in traditional suburban office space primarily occupied by regional and national corporate tenants.
Columbia’s Central Business District experienced a 17,238-square-foot decline in occupied space during the second quarter of 2011. This negative absorption can be largely attributed to downsizing by the South Carolina state government, which is an anticipated result of the state’s continued financial pressure to cut operational expenses. Although the CBD experienced an overall decline in occupied space during the second quarter, activity among private sector tenants remained strong as the insurance and legal sectors continued to expand. Activity among these sectors should result in positive absorption in the coming quarters.
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