Third Quarter of 2009 Brought Mixed Results for the Office Market in Columbia
October 14, 2009
COLUMBIA, SC – October 14, 2009 – The third quarter of 2009 brought mixed results for the office market in Columbia, South Carolina. After two straight quarters of negative absorption, the market began to stabilize during the third quarter as new tenants entered the suburban markets. However, during this same period the Central Business District’s largest tenant, SCANA Corporation, began the relocation process from the Palmetto Center to its newly constructed campus in the Cayce submarket.
New activity in the third quarter was centered around non-traditional office users. Several larger tenants leased space in what may be referred to as data centers in the Columbia area. Over 70,000 square feet was absorbed by these users bringing needed jobs to the Columbia market.
Several new tenants executed leases during the third quarter, ranging in size from 700 square feet to 3,500 square feet. While the sizes of these tenants are small it is an important sign that companies are slowly beginning to expand once again, albeit in a very cautious fashion. The fact that new tenants are moving into the market is a positive sign for the Columbia region.
As noted above, SCANA Corporation began their relocation from the Palmetto Center to their newly constructed corporate campus outside of Columbia’s CBD. This move marks a decline in the CBD occupancy from 86.68% at mid-year 2009 to 76.83% at the end of the third quarter. With 1,000 employees leaving downtown Columbia the impact will be felt by many. The availability of space in the Palmetto Center may not immediately impact tenants or landlords as this space is not easily subdividable and will not compete with existing availabilities in the market until the future of the property is determined.
Also of importance is the completion of Main & Gervais, Columbia’s newest high-rise tower. While the building is fully committed the three owner/tenants, these three tenants will vacate 180,000 square feet in the CBD during the first half of 2010.
The outlook for the remainder of 2009 and into 2010 is cautiously optimistic. It appears as though the end of the second quarter of 2009 may have marked the turning point for the local economic downturn, and recovery is very slowly beginning. After several quarters of rising unemployment, this economic indicator has turned with a decline in unemployment from July to August 2009.
Even with positive economic news landlords will continue to aggressively compete for tenants to fill vacant space, offering concessions and increased tenant improvement allowances. Existing tenants are preferring to renew leases for shorter terms. Tenants who have multiple years remaining on their lease term but who desire to renegotiate their lease may have waited too long as landlords can now see an end to the weak economy and may prefer not to renegotiate until terms reach expiration.
