Colliers Report: Elevated interest rates affecting office sales
January 12, 2023
Commercial Real Estate Research & Forecast Report
Q4 2022 Charleston Office
Market Highlights
Interest rates and economic uncertainty have caused sales (both investment and owner-occupant) to slow dramatically. Demand still exists in this market, but owners are unwilling to sell. Capitalization rates are higher than they have been in years; therefore, the investor motivation to purchase office buildings has waned. Also, owners who financed their office buildings at a low interest rate are holding on to them. Cash is still the best way to complete deals. Smaller deals using cash transactions are selling at capitalization rates near 7%.
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Key Takeaways
- Office sale velocity has slowed due to increasing interest rates and economic uncertainty
- Overall vacancy rates have been on a steady decline for over one year
- Class A continues to outperform Class B and C offices
Office leasing activity is healthy
Leasing activity has not been impacted by increasing interest rates. While high construction prices continue to create challenges for new leases, there remains a lack of supply. As a result, landlords are increasing rental rates. The suburban submarkets have still seen a tremendous amount of leasing activity over the past six to twelve months.
About Colliers
Colliers | South Carolina has over 145 staff members, including 62 licensed real estate professionals, covering the entire state with locations in Charleston, Columbia, Greenville and Spartanburg. Total 2021 brokerage volume exceeded $1 billion, which included over 590 sales and leasing transactions. In addition to traditional commercial real estate representation services for our clients, the company is actively engaged in Corporate Solutions and Healthcare Services. Colliers is an Accredited Management Organization (AMO) through the Institute of Real Estate Management (IREM) and is the largest manager of commercial real estate properties in South Carolina, with a portfolio of over 17 million square feet of office, industrial, retail and healthcare properties. Colliers’ staff hold 54 professional designations, the most of any firm in South Carolina. Colliers | South Carolina’s partner, LCK, provides project management services for new facilities and renovations across South Carolina and set a new record by managing a portfolio of projects approaching $1 billion in volume during 2021.
Colliers (NASDAQ, TSX: CIGI) is a leading diversified professional services and investment management company. With operations in 62 countries, our more than 17,000 enterprising professionals work collaboratively to provide expert advice to real estate occupiers, owners and investors. With annualized revenues of $4.3 billion and $65 billion of assets under management, we maximize the potential of property and accelerate the success of our clients and our people. Learn more at corporate.colliers.com, Twitter @Colliers or LinkedIn.
