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As Columbia office space shrinks, rents should go higher

Staff Report
Published Jan. 30, 2013

As space tightens, rents for Class “A” and “B” office buildings in the Columbia market are expected to rise in 2013, according to the commercial real estate firm CBRE Columbia.

In its annual market study, CBRE Columbia reported sales of major downtown office towers cut the vacancy rate in the Central Business District nearly in half to 12.24% in the fourth quarter of 2012.

The overall vacancy rate in the market dropped to 15.9% in 2012 compared with 20.1% the year before, the firm said. Vacancy rates fell in the suburban markets of St. Andrews, Dutch Fork/Irmo, West Columbia/Cayce and Southeast Columbia, the firm said.

Columbia recorded a net absorption of 270,190 square feet in the second half of 2012 and a total of 88,629 square feet for the year.

The average asking lease rate for downtown is $16.75 per square foot, CBRE said. Overall, the market average is $14.59.

Although the area’s office market is tightening, CBRE said it doesn’t think rents currently are high enough to justify new construction in the near future.

The report added that large tenants who “require high quality space could be courted as anchors for new construction in the next 18 months.”

“Tenant activity will increase both from existing tenants in the market as well as from tenants new to the market,” the firm said. “Most appear to be focusing on the Central Business District.”

A majority of the leasing activity last year was in Class “A” and “B” buildings as tenants upgraded to better locations and facilities, the report said.

Older, less attractive buildings are losing tenants because employees prefer having less personal space, such as a cubicle or open office layout, in a prominently located building rather than a private office in a Class “C” building, the report said.

The sale of the Meridian Building on Main Street and Center Point Office Park in the St. Andrews submarket established a return of investment capital to the market at attractive capitalization rates, the report said

AgFirst’s purchase of the Bank of America Plaza accounted for the absorption of 100,000 square feet of Class “A” office in downtown. The purchase of the Palmetto Center — former corporate home of SCANA — took 456,218 square feet of office space off the market.

The Palmetto Center acquisition alone took 8% of downtown office space off the market. Plans call for the building to be converted into a student housing complex.

Meanwhile, Class “C” space continues to linger on the market with an overall vacancy rate of 25% in the Central Business District compared to a Class “A” vacancy rate of 10.9%.

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