The Charleston office market is experiencing the tightest market in over a decade, according to the latest economic report by Colliers International. Demand for office space is strong, resulting in historical lows for vacancy rates and increasing rental rates and capital investments. Construction activity in the Charleston area is also on the rise with several new projects in the commercial real estate pipeline.
Companies are expanding quickly in the Charleston office market.
The occupancy rate in the Charleston office market continued to grow throughout 2015 with a total vacancy rate of 7.8 percent for the year. The Charleston peninsula had the strongest showing and ended 2015 with a total vacancy rate of 6.4 percent. The vacancy rate overall is down from 11.7 percent a year ago.
There is limited availability of Class A space in downtown Charleston, which has caused increased competition among potential tenants. Less than 60,000 square feet is available of Class A space in downtown Charleston, resulting in a 5.4 percent vacancy rate at the end of 2015. Class B and C vacancy rates were 7.8 percent and 4.9 percent for the year. More opportunities to rent office space are available in the surrounding suburban real estate markets.
Rental Rates are at a record high in the Charleston office market.
The increase in competition for office space has caused rental rates to increase to an average of $23.17 per square foot, an increase of 6.4 percent in 2015 over the previous year. Rental rates in downtown Charleston are the highest in the metropolitan area with an average rental rate of $31.29 per square foot in 2015. Class A rental rates averaged $34.93 per square foot in downtown Charleston. The suburban markets offered more affordable rental rates with an average of $21.33 for suburban office space.
Construction activity is gaining momentum in Charleston metropolitan area.
Companies are showing a strong desire to locate their businesses in the Charleston area, and construction activity has picked up in 2015. A few examples are listed below.
- The mixed use development project on Upper King Street that includes the Hyatt House, Hyatt Place Hotel, retail space, and 19,600 square feet of office space is now complete.
- 1 Central Island, completed last year on Daniel Island, is close to being fully occupied, with 75,000 square feet of Class A office space.
- Faber Plaza in North Charleston, a 125 square foot Class A office building is under construction. Sonepar North America has plans to occupy 25,000 square feet of this office space.
- Construction began recently at 101 Coleman, approximately 43,000 square feet of Class A office space.
- Courier Square, a mixed use development includes, office space, retail space and luxury apartments. The 90,000 square foot building is under construction at Columbus and Meeting Streets in downtown Charleston.
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Source: SC Research & Forecast Report Q4 2015/Colliers International