Large Blocks of Sublease Space Become Available Downtown

Key Takeaways

  • Vacancy downtown increases rapidly due to new sublease space.

Market Conditions

The vacancy rate was 17.7% at the end of the third quarter, up from 16.25% last quarter, largely due to a large amount of sublease space becoming available in the downtown submarket. Since the third quarter of 2016, overall weighted rents increased 3.8% from $19.23 per square per year full service to $19.97 per square foot per year full service.

Central Business District Conditions

The average asking rental rate for office space in the Central Business District was $23.00 per square foot per year full service at the end of the third quarter. Vacancy increased from 12.79% in the second quarter to 18.56% in the third quarter, when nearly 114,000 square feet of sublease space was added to the submarket. The majority (93%) of all available sublease space is within Class A buildings; thus, large tenants will find several new opportunities to lease in the market. Going forward, vacancy will remain high until several of the larger blocks of vacant space are removed from the inventory. Competition for existing tenants with space demands sufficient to fill entire building floors will be fierce, dimming the prospect for new construction.

Suburban Conditions

Vacancy in the suburban markets fell again in the third quarter from 18.27% to 17.20%. Vacancy declined in all submarkets and building classes except Class A space in the Spartanburg submarket, which increased slightly from 4.52% to 5.03%. Across the market, 68,222 square feet were absorbed, with Class C buildings accounting for two-thirds of the increase in occupancy. Full-service market rents rose 7.4% to $18.69 per square foot per year, while Class A space full-service rents increased 3.5% over the previous year, from $21.17 to $21.93 per square foot per year.

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