Developers Turn to Adaptive Reuse as Occupancy and Rental Rates Rise
- Interest from developers is strong with plans for several low- to mid-rise office buildings.
- The vacancy rate is declining throughout the market.
- Rental rates are on the rise, but concessions and free rent remain.
- Office-using employment recovered all jobs lost during the recent economic downtown and gained an additional 8,200 jobs as of May 2015.
- Future outlook is positive.
Conditions are improving for the Greenville, South Carolina office market, which is experiencing an influx of interest from investors and tenants. The office market ended the second quarter of 2015 with a vacancy rate of 16.4%, down from 17.5% the previous quarter and 17.1% one year ago.
Rental rates are inching upwards indicating a healthy market. Asking rental rates averaged $18.33 per square foot per year for the market at mid-year 2015, up from $18.06 the previous quarter and $17.38 one year ago. Class A and B asking rental rates averaged $20.97 and $17.10, respectively, increasing 3.4% and 7.4%, over the past twelve months. Rent is increasing and demand for space is strong, but landlords are still offering free rent, especially in the suburban submarket. However, as vacancy further decreases and rents increase, concessions will likely decline.
Tenants are competing for space in the Central Business District (CBD) as large blocks of contiguous, Class A space run low. A significant amount of CBD office space is not being marketed for lease, leaving very few options for tenants seeking space. Some landlords are opting to keep their building temporarily vacant with the potential for future redevelopment. Responding to the current shortage of space, several developers are venturing into adaptive reuse developments bringing a highly desirable cool factor to Greenville’s CBD office space.
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