Wilson Kibler releases third quarter market reports: Columbia sees growth in suburban office market

November 18, 2019

For most of the period since May, the yield spread has been negative as a result of tightening monetary policy—a reflection of investor pessimism about inflation and growth that has been exacerbated by the trade war. In early October, though, the spread turned slightly positive following the announcement that the United States and China had reached a trade agreement. The deal was modest and largely just delayed another tariff increase on US exports from China that was to occur in October. The deal did not address additional US tariffs set to be implemented on December 15th, though, and the president has said the initial agreement is just one of three phases of a larger agreement, leaving an air of uncertainty lingering over the economy. Beyond the trade war with China, much will also depend on what the Federal Reserve does moving forward.

Several factors make Columbia “recession-resistant,” including its position as the state’s capital and the presence of tenured professors at the University of South Carolina. Average office rents across the market continue to rise, ending the quarter at $17.95/SF from $17.47/SF in the previous quarter and $15.64/SF one year ago–a 14.77% increase in just one year.

Rents in the Central Business District haven’t seen as much growth, though. By quarter’s end, average rates in the area between the Congaree River and Harden Street from Elmwood Avenue to Blossom Street, held steady at $20.20/SF from $20.16/SF one year ago. With just 2,039 available garage spaces, parking constraints continue to challenge office users in the CBD. The growth of mixed-use and multi-family developments downtown has further strengthened the competition for surface spaces. Unless the market sees significant rental rate growth, the cost of constructing a new office property with significant parking just isn’t feasible.

It’s not surprising, then, that three of the largest announcements in the office market this quarter occurred outside of the CBD:

• In Irmo, Mashburn Construction delivered a brand new43,480-square-foot medical office building at 7182 Woodrow Street in August. The space is home to seven tenants with South Carolina Internal Medicine taking a large portion.

• An excellent example of the influx of retail and office users out of the CBD to the North Main (NoMa) area, TPM, a Greenville-headquartered engineering and design firm, announced plans to relocate its Columbia office from 1241 Assembly Street to 2510 North Main Street.

• Local Developer, Joe Taylor, announced plans in August to build a two-story, 5,400-square-foot Class A office building at 506 Meeting Street in West Columbia, which is set to deliver early next year.