Rising Costs and Limited Options for Columbia Office Tenants
- The Columbia, South Carolina office market ended 2015 with positive absorption for the quarter and the year, increased occupancy and higher rental rates than the previous year.
- Construction remains limited in the market despite limited quality spaces being available.
- Employment utilizing office space is increasing as companies continue to grow in Columbia.
- The market is poised for stronger growth in 2016, which will translate into declining vacancy rates, increasing rental rates and higher occupancy costs.
Low Vacancy Rate Leaves Few Quality Options
Robust interest in the Columbia, SC office market is contributing to a downward trend in vacancy rates, leaving users with limited options for space. At the end of the fourth quarter of 2015, the total vacancy rate for the market was down to 16.1% from 16.8% the previous quarter and 17.6% one year ago. The vacancy rate is at its lowest level in recent times. Space continues to be absorbed throughout the market and larger blocks of Class A space greater than 20,000 square feet are running in low supply. As a result, tenants are finding themselves competing for space and oftentimes the only option is remaining in the space they currently occupy. Lease renewals are being considered well in advance of lease expiration dates in an attempt to secure their space as well as obtain lower rental rates than those of the future. The process to renew a lease or relocate is extremely long and is surprising to many tenants in the market who run out of time to complete their renewal or new lease. When this happens, the tenant forfeits much of their leverage to negotiate.
The Central Business District (CBD) remains the focal point of the market and ended 2015 with a total vacancy rate of 10.6%, down from 10.7% the previous quarter and 10.9% one year ago. New leasing velocity has been limited given the few available options for quality space. Less than 250,000 square feet of Class A office space remain vacant in the CBD contributing to a Class A vacancy rate of 10.8%.
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