Tenants Turn to Suburban Submarkets
The new year is off to a slow yet promising start for the Columbia, South Carolina office market which ended the first quarter of 2014 with a total vacancy rate of 17.52%, a slight decrease of 3 basis points from year-end 2013 and 247 basis points lower than it was a year ago. Overall average asking rental rates were up 10 cents per square foot from year-end 2013 to $15.44 per square foot for the market.
The Central Business District (CBD) experienced an increase in vacancy for the first time in over a year reaching a vacancy rate of 12.11% at the end of the quarter. Despite the slight increase, the vacancy rate remains below the first quarter 2013 level of 12.72%. The negative absorption was caused by low leasing velocity coupled with a large block of space at 1901 Assembly Street becoming available to the market. The recently vacated 42,000 square feet is the result of BB&T relocating to Capitol Center located at 1201 Main Street.
Even with the additional available space, the CBD remains in short supply of high quality office space. Class A and B vacancy rates were just 11.29% and 9.10%, respectively, while class C vacancy was much higher at 19.57% at the end of the first quarter of 2014. Much of the class C space remains in a condition that may not warrant leasing until significant renovations are completed. Renewals and expansions made by existing tenants in the CBD make it obvious that a significant increase in class A and B vacancy is not likely to happen.
The scarcity of quality space motivated redevelopment and renovation projects last year, but speculative construction remained absent from the market. For speculative construction to occur, the market needs to experience increasing rental rates and larger tenants willing to commit to long term leases. These two requirements are not evident in the current market.
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