Tenants to Face Significantly Higher Costs in Leasing Space
- Demand for office space in Columbia, South Carolina remains strong, contributing to another record-setting quarter of declining vacancy and increasing rental rates. Rental rates are at historically-high levels.
- Concessions are declining while parking and tenant improvement costs are increasing significantly.
- Time-frames for relocating are increasing as tenants must look for space well in advance of current lease expirations.
- Construction is underway on two new office buildings, which will collectively add 253,000 square feet of Class A office space to the Central Business District’s inventory.
Office markets nationwide are experiencing growing demand from tenants looking to establish new locations or expand existing offices. As a result, office markets across the U.S. are seeing positive absorption, declining vacancy rates and increasing rental rates. Heightened demand is creating tighter markets with higher rental rates than ever before. Construction remains restricted to few markets despite the significant need for new space.
The Columbia, SC office market mirrors nationwide trends and welcomed robust interest and leasing activity throughout the third quarter of 2015, which ended with a vacancy rate of 16.2%, down from 16.9% at mid-year 2015 and 17.2% one year ago. The vacancy rate does not accurately depict true market conditions as much of the vacant space is in functionally obsolete properties, which are not in leasable condition. The market is the tightest it has been in over half a decade, and the downward vacancy trend is forecasted to continue. Vacancy was as high as 21.0% in 2011 due to the economic slowdown motivating government and business downsizing. The market has recovered and continues to improve. Space is becoming increasingly difficult to find as new tenants entering the market are leasing the remaining few ideal spaces. Given the limited supply of available Class A space, the majority of third quarter leases were for Class B properties.
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