Office Market looks promising as 2016 comes to a close and 2017 unfolds
March 9, 2017
The Charleston office market is thriving, as the region continues on a path of economic prosperity. With a few larger tenant shifts, notably the departure of ITT Technical Institute from its approximate 20,000 square feet (SF) office at Aviation Business Park, the overall vacancy rate nudged up to 8.1%. Additionally, the overall rental rates shifted slightly down to $21.30/SF. After a jump from the beginning of the year to the middle of the year, the rental rates appear to be balancing out at year-end. Despite these slight changes, the market remains robust, with a healthy supply of new construction projects on the horizon.
Downtown Charleston continues to have a shortage of office space, generating the highest rents and lowest vacancy rates within the Charleston MSA. Average rents for space within Class A, 10,000+ SF office buildings on the peninsula ended the year at $38.26/SF, with vacancy at 5.1%. Favorable conditions have caused unprecedented redevelopment activity from developers in recent years, specifically in the areas north of Calhoun Street – upper Meeting Street, Morrison Drive and the West Side neighborhood. Aside from the office sector, equal or more activity in the multifamily and retail sectors show a balanced surge of projects for the area.
Class A product in the suburban markets saw average rents of $25.90/SF at the end of the year, with vacancy at 8.3%. With the delivery of Faber Plaza in North Charleston earlier in the year and projects like Nexton, the Daniel Island Square building and the new Blackbaud complex in the pipeline, the suburban market is welcoming a significant amount of well-positioned, contiguous Class A office space to the fold.
Several investment sales closed out the year in the third and fourth quarters of 2016. Likely planning modest improvements to these Class B type properties, investors are seeking better returns with projections of higher occupancy and rental rates. As we’ve seen in recent years, there is solid demand for improved Class B office space in the market from tenants that are not quite willing and ready to spend top dollar for Class A space. The vacancy rate of Class B office space averages 10.5% in the suburban markets, with average rental rates of $17.07/SF. However, tenants can expect to pay around $21.00/SF for newly renovated Class B properties in desirable office corridors like Faber Place Office Park.
To view the full office market report, please visit: http://socialnet.naiglobal.com/journal_item_attachments/000/564/907/original/Charleston_Office_Market_Report_4Q16.pdf?1489069890
For more information, contact Scott Peevy, CCIM, at 843 518 5316 or [email protected]
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