Tremendous growth continues in Charleston’s suburban submarkets for both office and industrial sectors
February 15, 2017
CBRE Research has released the Q4 2016 data on the industrial and office commercial real estate markets in Charleston.
Vacancy has risen significantly in the last four quarters in the office sector, which can be attributed to new suburban construction and the relocation of a large tenant from leased space to owner-occupied spaced. In tertiary markets like Charleston, statistics can be heavily influenced by the movement of a single tenant. This was the case in Q4 2016 with BAE Systems vacating 73,000 sq. ft. in the North Charleston submarket. Vacancy increased in the suburban submarkets with lower asking rates, leading to lower average asking rates for the market as a whole.
New office construction is still restrained on Peninsula resulting in a shift to suburban submarkets. There is currently 42,000 sq. ft. Class A Space under construction in the East Cooper submarket.
The Peninsula continues to struggle to accommodate growth with Class A office vacancies low and little new space expected to be delivered anytime soon. However, for the first time in the past several quarters, larger space has become available downtown. The downsizing and relocation of tenants has opened 15,000 sq. ft. of space. Additionally, the development of co-working space, such as Local Works and Launchpad, to meet the needs of smaller start-up tenants, seeking short-term leases is steady.
Charleston’s industrial sector experienced another strong quarter in Q4 2016. Absorption remained positive for the fifth consecutive quarter and over all vacancy is down to 6.1%. Asking rates have continued to rise to new heights, reaching $5.62 per sq. ft. on a triple net basis. With over 1.6 million sq. ft. currently under construction, speculative development continues to be an integral part of the Charleston’s industrial growth. The North Charleston/Ladson and I-26 North submarkets hold the lion’s share of the development with over 4 million square feet.
In the last four quarters, industrial asking rates have risen by 21% resulting from the delivery of quality product. Investment prospects are high for the industrial sector if the market continues to demonstrate its capability to produce high returns.
The following are highlights of each report.
Office
• Negative absorption largely attributed to single tenant movement in North Charleston
• Average rental rates lower to $24.73 per sq. ft. full service as large suburban vacancies hit market
• Peninsula sees first sizeable availability of over 8,000 sq. ft. in past several quarters
• Suburban submarkets continue to be the focus of new office development
Industrial
• Charleston market sees over $109 million in industrial investment sales
• 107,885 sq. ft. absorbed, lowering vacancy to 6.1%
• 1.6 million sq. ft. of speculative industrial product currently under construction
• Asking rates continue to rise to over $5.50 per sq. ft. on a triple net basis
For more information, click visit http://www.cbre.us/o/charlestonsc/Pages/market-reports.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 (based on 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
