Throughout 2004 the Greenville office market fundamentals improved, and all signs point to improvements in 2005. After posting negative net absorption in both 2002 and 2003, the office market posted positive net absorption of 69,529 square feet for 2004. This resulted in the overall market vacancy rate declining slightly from 23.9% at year end (YE) 03 to 23.7% at YE 04.
Even better news was the performance of Class A space Many consider the vitality of Class A space to the true barometer of the office market. Based on this measurement, the market turned in a great year with strong Class A net absorption at 239,000 square feet. As a result, the CBD Class A vacancy rate was 8.7% at YE 04, down from 11.6% at YE 03. The Suburban Class A vacancy rate also improved, down from 31.5% at YE 03 to 25.8% at YE 04. Many companies used the market softness to move from Class B and C properties to Class A buildings with no significant in-migration of new tenants during the year. Due to the continued market softness, the average asking retail rental rate remained at the 2003 level, $15.75 per square foot. The softness of the market is still focused in the suburbs with the CBD market being much stronger.
Several office condominium developments entered the market during 2004, both in the CBD and suburbs. Office condominium development has occurred in Greenville over the past decade on a small scale, but this level is unprecedented. It is too early to tell how the market will accept this product.
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