Historically-High Rental Rates Create Ideal Investment Conditions
- Greenville, South Carolina’s office market continues to improve, ending 2015 with record-high rental rates and declining vacancy.
- Development activity is gaining popularity in the market with several new, redevelopment and adaptive reuse projects in the works.
- The market is well positioned for various investment opportunities.
- Office-using employment continues to grow as the professional and business services sector expands.
- 2016 will likely bring continued improvement to the market.
Tighter Market than 2014
Greenville, South Carolina continues to be on the radar of many companies looking to establish a new location. Just recently, WYNIT distribution announced plans to relocate its headquarters from Syracuse, New York to the ONE development in Greenville’s Central Business District (CBD). The company plans to occupy approximately 57,000 square feet vacated by CertusBank. The company chose Greenville for its new headquarters because of the area’s low cost to do business, high quality of life, skilled labor force and strong presence of logistics and distribution companies. The company’s decision is a testament to the area’s attractiveness and potential to attract additional headquarters.
The office market ended 2015 with lower vacancy and higher asking rental rates than the previous year. As of year-end 2015, the market’s total vacancy rate was down to 16.5% from 17.0% the previous year and 17.5% two years ago. Class A and B space was in greatest demand in 2015 with vacancy rates of 13.6% and 21.0%, respectively.
The CBD vacancy rate is down to 14.8% from 16.3% at year-end 2014 and 17.4% two years ago. Class A and B vacancy rates were 16.1% and 11.7%, respectively at year-end 2015.
Suburban submarkets have welcomed positive activity over the recent year, ending 2015 with a total vacancy rate of 17.8%, up slightly from the previous quarter, but down from year-end 2014 when vacancy was 19.2%. The slight increase in vacancy over the third quarter of 2015 is the result of Athene vacating approximately 50,000 square feet at 400 Brookfield Parkway. One Research Drive is nearing completion on the Clemson University International Center for Automotive Research (CU-ICAR) campus in suburban Greenville. Upon completion, the approximately 80,000-square-foot, Class A office building will add approximately 27,000 square feet of Class A space to the market’s existing inventory. JTEKT recently announced that it will locate its North American headquarters in the building and plans to be fully operational during the first quarter of 2016.
Company expansions are creating a greater demand for large blocks of contiguous, Class A space. As these remaining blocks are absorbed, the market will tighten further and tenants will find themselves competing for the limited options of space. Additionally, some tenants are choosing to upgrade their space, moving from Class B to Class A buildings, placing additional pressure on the available inventory. At year-end 2015, less than 700,000 square feet of Class A office space was vacant in the market. As a result, rental rates are increasing and will continue to rise as Class A availability becomes increasingly scarce.
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