Low vacancy in office market squeezes expanding occupiers
May 4, 2016
CBRE Research has released the latest data on the industrial and office commercial real estate markets in the Charleston market.
Office
With the absorption of over 100,000 sq. ft. in first quarter of 2016, vacancy declined to 8.4%, presenting the Charleston office market with a space issue with existing occupiers planning for expansion. Given the current lack of supply of office space and growth rate, the demand will not be met by existing inventory.
“During the past four quarters, the Charleston downtown market has absorbed almost 450,000 sq. ft.,” said CBRE Research Manager Brian Reed. “With just under 900,000 sq. ft. of space available, current absorption levels are unsustainable without the addition of new product.”
Development has begun in the suburban submarkets but this will not address the demand on the Peninsula. One of the most notable transactions of the quarter was the lease of 14,000 sq. ft. of space by Launchpad, an operator of co-working space on the Peninsula. This follows a national trend of smaller markets breaking into co-working space, as noted in CBRE’s Shared Workplaces, Part 2 report published earlier this year.
Industrial
While market activity was flat in the first quarter of 2016, the long-term trend of high growth is not diluted. Rising asking rents, declining vacancies and historic levels of development are still on trend for the Charleston Industrial market.
The most notable story of the quarter is the activity of automotive manufacturers. First, construction has started on Volvo’s 2.3 million sq. ft. manufacturing facility. With an expected delivery of 2018, CBRE forecasts significant long-term impact on the local industrial market similar to that of BMW in the Greenville-Spartanburg industrial market. We are likely to see increasing industrial development along I-26 corridor and an influx of suppliers looking to effectively serve the needs of Volvo. Additionally, Daimler is also driving the market with its 300,000 sq. ft. expansion.
“While the expansion of Daimler is smaller than Volvo, the impact is expected to be more immediate for their suppliers, as the manufacturer is already highly active in the market,” said Reed.
The following are highlights of each report.
Office
• Vacancy declines by over 100 basis points to 8.4%
• Lack of development combined with strong economic growth leaves Peninsula submarket poised to run out of space
• Shared workspace is growing in the market
Industrial
• Volvo starts construction of their new 2.3 million sq. ft. manufacturing facility, which should impact the local industrial market significantly
• Multiple speculative projects are completed, forcing a rise in vacancy
• Investors and developers are attracted to the market’s strong fundamentals with multiple industrial land sites trading hands during the quarter
For more information, visit our website for links to full reports. http://www.cbre.us/o/charlestonsc/Pages/charleston-commercial-real-estate.aspx
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.
