The vacancy rates in Charleston and surrounding markets are historically low, and will continue as a result of on going tight market conditions. The vacancy rate at the end of the third quarter of 2017 went down from 7.9 percent to 7.4 percent, according to the latest Collier International Research & Forecast Report for the Charleston region. As a result, rental rates since 2016 have increased by 14.3 percent from $23.55 per square foot to $26.92 per square foot in 2017. Overall there have been a total of 63,000 square feet absorbed market-wide, with no new buildings being added to the supply.
Market conditions in downtown Charleston are even more favorable with a vacancy rate of 6.3 percent, and an asking price of $34.81 per square foot for a rental space. This rental rate is up from $30.85 per square foot asking price a year ago. There is only one building under construction in this submarket – the Courier Square, an 88,000 square foot office space, which is being preleased by Greystar. Rental rates for the Class A space are even higher as a result with an average of $36.85 per square foot per year, an increase of 2.5 percent from last year.
This has resulted in retailers feeling the pinch for new retail space as demand exceeds the supply. It may now take up to 18 months to find a new space to rent on the Charleston peninsula. Overall, market conditions remain tight for the entire Charleston region, with tenants struggling to find space throughout the region. Most of the available space under construction (417,000 square feet) is already preleased.
The overall vacancy rates in the suburbs have dropped to 7.76 percent at the send of the third quarter from 8.06 percent in the second quarter of 2017. There have been nearly 27,000 square feet of rental space absorbed, with the North Charleston area having the most favorable market conditions. The rental rates in North Charleston have gone up by 7.6 percent from $22.55 per square foot to $24.27 per square foot since 2016. Class A space saw even higher rental rates, with an increase of 4.4 percent in North Charleston, and an asking rate of $27.14 per square foot. Construction and redevelopment remain strong in suburban markets with four new buildings under construction.
Source: Collier International Research & Forecast Report, Charleston Q3 2017, “Vacancy Remains at Historic Lows,” by Ron Anderson
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