Published Oct. 8, 2015
Rental rates reached record-high levels at the end of the third quarter, with asking rates averaging $16.32 per square foot per year, according to the latest office market report from Colliers International.
Asking rental rates have increased 8% in just two years, with Class A rates averaging $19.94 at the end of the quarter, up from $19.56 at the midpoint of the year and increasing 6.9% since the third quarter of 2013. Class B office space rental rates averaged $16.14, an increase from $15.49 two years ago, the commercial real estate firm said.
Rates will rise as the market continues to tighten. At the end of the third quarter, Columbia saw a vacancy rate of 16.2%, down from 16.9% at mid-year and 17.2% a year ago.
“The market is the tightest it has been in over half a decade, and the downward vacancy trend is forecasted to continue,” Colliers said. “Space is becoming increasingly difficult to find as new tenants entering the market are leasing the remaining few ideal spaces. Given the limited supply of available Class A space, the majority of third quarter leases were for Class B properties.”
With less than 400,000 square feet of Class A space available, tenants are competing for space and paying premium prices in the landlord-favored market. Construction is currently limited to a pair of Central Business District mid-sized projects in the 110,000-square-foot Innovation Center and the 143,000-square-foot First Base Building at Bull Street Common.
Colliers expects current trends to continue into the fourth quarter.
“The fourth quarter of 2015 will be a pivotal time for landlords and tenants as landlords continue to deal with rising operating and construction costs,” the company said. “With a landlord-favored market, tenants will bear the brunt of rising rental rates, increased parking costs, out-of-pocket construction costs and delays in delivering space.”