Wave of Investor Sales Hits Columbia CBD Office Market
- Investors acquired four major towers in four months in downtown Columbia.
- Rental rates were slightly lower over the third quarter and year-to-date due to a shortage of high-quality vacant space and new construction.
- Lack of available space hinders absorption.
The overall market vacancy rate in Columbia fell from 17.43% at the end of the second quarter of 2017 to 17.18% at the end of the third quarter. The market average asking full service rental rate decreased slightly from $16.56 per square foot per year the previous quarter to $16.02 per square foot per year this quarter. Over the last year, the asking rental rate for the market has decreased 2.3% but that is largely due to the lack of quality vacant product and lack of new construction. In essence, what little vacant space remains is being marketed at a lower rental rate.
Columbia Business District (CBD)
The third quarter vacancy rate in the Central Business District (CBD) was 12.27%, down from 12.31% at the end of the second quarter of 2017. The overall average asking rental rate was $19.32 per square foot per year, which was 13.6% higher than a year earlier. Average rental rates fell 5.9% from the second quarter due to the absence of new construction and have largely locked most tenants into place, limiting the amount of space available for rent. Tenants are slowly absorbing the vacant spaces remaining in buildings, and what is left is lower quality, less desirable space that drives the average weighted rental rate lower. When factoring in comparable for renewals and expansion, it appears that rents have largely stabilized with Class A, B and C buildings commanding $23.00 – $23.50 per square foot, $19.00 - $19.50 per square foot and $17.00 - $17.25 per square foot, respectively.
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