Strong demand for office space spawns higher rents, propels new development in Charleston

CHARLESTON, SC – Key metrics continue to show strong and sustained growth for Charleston’s local and regional economy through the third quarter of 2015. As the Charleston economic boom continues, the effect on the local office market trends the same: increasing rental rates and declining vacancy. Demand for office space in the downtown Charleston Central Business District (CBD), in particular, is as strong as ever with the spillover leading to new construction as investors and developers clamor to keep up with the demand in both the CBD and suburban submarkets. With the continued effect of Boeing and huge investment announcements by Volvo and Daimler this year, the economic future of our region continues to look bright.

Trends in rent and vacancy rates this quarter can be summed up by the simple concept of supply and demand. People want to have office space in Charleston, landlords that have it are in a good position. As tenant demand rolls on, landlords are continuing to enjoy decreased vacancy rates and higher rents in their properties. In the third quarter the overall market saw an increase in rental rates to a market average of $21.10 /SF, and a decrease in vacancy to a market average of 5.6 percent. As predicted, these trends were even tighter downtown, ending with a 7.7 percent vacancy rate and an average rental rate of $34.05/SF for Class A office space. Going forward, tenants looking for new space or renewing/expanding current space can expect to see less concessions as landlords are able to leverage these favorable factors for higher rents with reduced tenant incentives.

It is no secret that our region is experiencing unprecedented economic growth. The buzz of the Boeing effect still means as much as ever to our local economy. Big announcements from the automotive industry earlier this year continue the spectacular momentum and further prove that the Charleston MSA is a great place to do business on a global scale. Both Volvo and Daimler each announced $500 million dollar investments in manufacturing operations that will reportedly add a total of 3,300 direct jobs. Naturally, there will be other direct impact suppliers and indirect multipliers as service related businesses flock to the area to support these flagship entities. Riding the wave of strong economic fortune that the region is experiencing, investors and developers are capitalizing on the prime conditions with a number of projects planned or under construction.

A few notable projects include:

• Central Business District: 550 King Street aka Midtown – 20,000 SF mixed-use office development completed in the third quarter of 2015 with lease rates ranging from $34.50/SF-$38.00/SF.

• Central Business District: Cigar Factory – 244,000 SF mixed-use historic renovation delivered Class A office space to first tenants earlier this year.

• Central Business District: Courier Square – Mixed-use development in the planning stages to include 80,000 SF of downtown Class A office space.

• North Charleston: Faber Plaza at 4400 Leeds Avenue – 125,000 SF Class A suburban office building located in the popular Faber Business Park currently under construction with an estimated delivery date in the second quarter of 2016.

• Mount Pleasant: Gateway Mount Pleasant at 235 McGrath Darby Boulevard – 60,000 SF suburban office with a planned delivery date in the second quarter of 2016.

• Mount Pleasant: 101 Coleman Boulevard – The 42,500 SF Class A office building overlooking Shem Creek at the corner of Mill Street & Coleman Boulevard broke ground with 234 parking spaces.

The Class B and C markets also are benefitting from the sustained growth. As Class A space is absorbed, Class B & C landlords are seeing higher demand as some tenants pursue a better value. Rental rates for both Class B and Class C office space increased to an average of $17.15/SF and $14.64/SF, respectively. This is an opportune time for these landlords to capture rising rents to help fund needed building updates or renovations, which in turn will help attract larger credit tenants to their repositioned properties.

About NAI Avant

NAI Avant’s commercial real estate business is one of the largest in the Southeast. With over 65 professionals, the firm provides comprehensive brokerage, leasing, development, property and project management services. For nearly three consecutive decades, the group has had more of its brokerage professionals recognized as top producers or recipients of the top awards than any other firm in South Carolina. As a member of the NAI Global Network, NAI Avant is affiliated with more than 375 offices strategically located throughout North America, Latin America, Europe and Asia Pacific, with over 6,700 local market professionals, managing over 380 million square feet of property. NAI Global is the single largest, most powerful global network of owner-operated commercial real estate brokerage firms and is a wholly owned subsidiary of C-III Capital partners. NAI Global Member firms, leaders in their local markets, are actively managed to work in unison and provide clients with exceptional solutions to their commercial real estate needs. NAI Avant’s Property and Project Management Group currently manages a multi-million square foot portfolio of properties across South Carolina, North Carolina, and Georgia. Through its Avant Healthcare Division, the firm provides comprehensive services to hospitals, clinics, and physician groups. NAI Avant, founded in 1966, is headquartered in Columbia, SC with an office in Charleston, SC. Find out more about NAI Avant and its services at www.naiavant.com. Be sure to follow us on Twitter @NAIAvant and like us on Facebook.