Published Aug. 7, 2012
There has also been a steady stream of technology-related companies moving into the downtown area, according to Colliers International’s second quarter commercial real estate report.
Overall, the amount of vacant office space in the Columbia market dipped more than a percentage point in the second quarter and forecasts call for improving conditions through the rest of the year.
Colliers reported the vacancy rate dropped to 23.31% compared with the first quarter’s rate of 24.39%. While high, the commercial real estate firm noted there are some properties with “significant vacancy which inflate” the rates.
Vacancy rates for Class “A” and Class “B” property are much lower at 12.76% and 17.99%, respectively, largely due to businesses seeking to upgrade into better properties and move into the Central Business District from suburban locations, the report said.
One of the downtown properties that benefited from expansion during the second quarter was at 500 Taylor St., which saw nearly 32,000 square feet of space absorbed. The building is now 100% occupied as the Aflac Group continues to build its Midlands operations. The insurance company now has more than 500 employees in the Columbia area and is aiming to build a workforce of 825 by the end of the year.
Since the end of 2011, the Columbia office market has absorbed 126,134 square feet of vacant space, Colliers noted.
“Improvement is forecasted to continue throughout the remaining quarters of 2012 and into 2013 with positive absorption and increasing occupancy rates,” the report added.
The so-called “flight to quality” that occurs when tenants upgrade to better properties leads to declining inventory and increasing rental rates, the report said.
The vacancy rate for suburban submarkets of Cayce/West Columbia, East Columbia, Forest Acres, Northeast Richland and St. Andrews increased to 24.1% for the second quarter compared with 19.1% for the same period in 2011.
Colliers expects rents will increase for space in downtown Columbia as Class “A” space fills up.
The average asking rate for space in Class “A” buildings in the Central Business District was $19.39 a square foot in the second quarter, followed by $16.45 for Class “B” and $15.62 for Class “C.”
“While rental rates will increase in the CBD, the opposite will occur in the suburban markets as landlords continue to aggressively seek tenants by lowering rental rates,” the report said.
The average asking rates for all classes of buildings in suburban markets were $12.98 per square foot in Cayce/West Columbia, $12.50 for East Columbia (Devine Street), $14.57 for Forest Acres, $13.28 for Northeast Richland, and $13.50 for St. Andrews.