Occupancy Rate for Office Market in Columbia’s Central Business District

COLUMBIA, SC – May 31, 2009 – As of May 31, 2009, the occupancy rate for the office market in Columbia’s Central Business District (CBD) stood at 87.01%.  This rate compares to 87.47% at year-end 2008, and 87.39% at mid-year 2008.  Thus far, Columbia’s CBD has weathered the economic storm which has adversely affected many markets across the Southeast.  We have long touted the stability of the Columbia office market due to the lack of any significant single market driver, and due to stable components such as state government, the University of South Carolina and Fort Jackson.  However, of these three foundations in the Columbia market, two are showing signs of weakness due to state budget cuts.  The corporate community in Columbia and the CBD has thus far withstood the challenges of this economy which is quite an accomplishment.

Columbia’s Main Street has seen the addition of  the Meridian Building and the First Citizens Corporate Headquarters over the previous four years; the third new office project, Main and Gervais, is now under construction. Upon completion, the 18-story building will be nearly 100% occupied with commitments from NBSC, Edens & Avant and McNair Law Firm.  The tower will have its first owner/tenant move into the building in less than one year.    The vibrancy of Main Street with these new buildings, in addition to recently completed streetscaping projects, provides a pro-business progressive atmosphere in the CBD.

Weathering the storm thus far is a huge success for Columbia. The challenges facing downtown Columbia in the next twelve months, while significant, are not related to a troubled economy.  The SCANA Corporation’s master lease for the 456,000-square-foot Palmetto Center will expire in the fourth quarter of 2009.  SCANA will then move to its new corporate campus in Cayce, South Carolina, leaving one of the largest office buildings in Columbia completely vacant.  Adding 456,000 square feet of vacant space to the market at year-end 2009 will immediately drop the occupancy rate from the current rate of 87.01% to 77.23% (a net change of 9.78%).  Additionally, the office market will further drop upon completion of the Main and Gervais building in 2010 as an additional 180,000 square feet of office space becomes available.  The three anchor tenants will vacate space in three separate buildings resulting in an additional reduction of the CBD occupancy rate to 73.20% by mid-year 2010.

Even with the challenges ahead, the tenant activity in the CBD remains reasonably strong.  Much of the activity  experienced thus far in 2009 has been the constant movement of tenants relocating within the CBD.  Additional positive activity is attributed to the inward flow of new tenants into the CBD.

Although occupancy rates will be lower than recently experienced through the remainder of 2009 and into 2010, the opportunity to attract new tenants to a beautifully redeveloped Main Street will be great.  The 456,000-square-foot Palmetto Center provides an opportunity for economic developers to attract regional or national corporations, as well as  out-of-state developers.  The space vacated by the new tenants of Main and Gervais will be a mix of prime retail space along Main Street as well as Class A and Class B office space.  Incentives and availability of convenient parking will be crucial components for recruiting and retaining tenants, and ensuring that the CBD remains a vibrant hub for the City of Columbia.