Things are starting to look up for an office market besieged by vacancies and short-term rent renewals last year.
According to a Q1 market report from Cushman & Wakefield and Thalhimer, demand for office space is starting to inch back to healthier levels across the state with owner and investor interest in purchasing office space exceeding supply in the Upstate.
Unemployment rates in the Greenville and Spartanburg metro areas have reached a respective 4.6% and 5.1% — around 1% lower the national average — and leasing activity has started to pick up again. The unemployment average in both Charleston and Columbia has also fallen to 5%.
Still, in Columbia and the Upstate, it remains a buyer’s market. Vacancy rates are at an all-time high around 10.3% in Greenville,10.9% in Charleston and 19.4% in Columbia with the average asking rent scaling up to a respective $22.36, $28 and $18.79 per square foot.
While the pandemic has put a damper on renewed office leases across the board, in the Charleston market, new deliveries of more than 900,000 square feet across the area have incentivized relocation. At the release of the report, 64.7% of office space under construction was still available for lease.
A few key sales include the purchase of the 21,701-square-foot Blanding Office Plaza at 1410 Blanding St. in Columbia by Patrick McKain for $1.5 million, ECPI University’s $8.5 million purchase of a 50,000-square-foot bulding at 3800 Paramount Drive in North Charleston and Kaplan Early Learning Co.’s $2.7 million purchase of a 19,005-square-foot space on 601 E. McBee Ave. in Greenville.
With the continuation of negative net absorption from last year (negative 24,400 square feet in the Greenville market, negative 77,000 in Charleston and negative 95,000 square feet in Columbia), construction completions have been non-existent in the Columbia market since 2019.
More than 400,000 square feet of office space was completed last year in the Greenville market, but construction remains limited to the 160,000-square-foot Greenville County Administrative Office at 798 S. Church St., slated for a 2023 delivery.
With little new office space available on the market in Columbia and the Upstate, tenants are beginning to opt for standard renewal terms again and request improvements that align with new COVID-19 protocols as employees return to the office, according to the report.
In Greenville, Wyche Law firm leased 28,584-square-feet at 200 E. Broad St., while TTI, Sage and Zetronix Corp. moved into a total of 34,807 square feet on the CU-ICAR campus.
Office rent prices remain fairly stable, according to the report, partially due to the lack of new product in Columbia and an increase in the cost for the materials and labor needed for property improvements across the board.
High construction costs have prompted high rents in Charleston in particular, but landlord concessions and cheaper rental rates are expected to come with additional deliveries at the end of the second quarter.