Vacancy rates falling, rental rates rising in 2018

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Workforce readiness programs such as ReadySC and Apprenticeship Carolina are priming the Columbia market for an increase in development, according to a new report from Colliers international.

Vacancy rates in Columbia finished the first quarter of 2018 at 11.74%, a slight dip from 11.77% at the end of the 2017. Vacancy in the Central Business District stood at 11.56%, and while overall average rental rates are rising, a gap exists between current rates and rates high enough to spur new downtown office development, the Colliers study (.pdf) found.

The CBD vacancy rate stood at 12.07% at the end of 2017. The overall rental rate rose from $20.36 per square foot in the fourth quarter of 2017 to $20.44 per square foot.

Overall full-service rental rates increased from $16.75 per square foot to $16.78.

Class A space is at a premium in suburban markets, where vacancy is just 8.77%. Overall suburban vacancy stands at 11.85%. Class A rental rates have remained steady at $19.07 per square foot, an increase of two cents per square foot from the fourth quarter of 2017. Overall suburban rental rates, however, have increased to $15.07 per square foot from $14.61.

The first quarter saw an overall net negative absorption of 31,892 square feet, largely because of a negative absorption of 90,827 square feet in Class A property.

According to the Bureau of Labor Statistics, Columbia office-using employment has increased 3.5% from December 2016 to December 2017. There have been 2,900 office jobs added during the same 12-month period.

The first quarter of 2018 began with 74 lease transactions, with 69 of those new leases, the report found. Most of the leases involved less than 10,000 square feet. There were also 22 building sales in Columbia, mostly ranging from 2,000 square feet to 10,000 square feet, from January through March 2018.

Significant transactions included:

• A 10,000-square-foot office building located at 1911 Gadsden St. sold for $950,000.
• A 12,996-square-foot Class B office building at 19 Technology Circle within the Carolina Research Park in Northeast Columbia sold for $1.65 million.
• A 7,500-square-foot building at 140 Dutchman Blvd. sold for $550,000.

The report forecasts Columbia landlords will upgrade current office spaces with new amenities and improvements to retain tenants. With a projected upgrade in buildings, rents are expected to rise.