As demand for new construction continues to grow in the Charleston market, vacancy rates continue to rise according to Colliers International Research & Forecast Q4 2018 Report. The expectation is that the vacancy rate will continue this trend into the first few quarters of 2019. This vacancy rate is on the rise primarily due to 11 new office buildings delivered in 2018 that totaled 433,024 square feet of new construction. The Charleston office market has a total of 13,185,388 square feet in 379 buildings within seven Charleston submarkets.
Due to the increase in office space, the rental rate also dropped from $24.13 per square foot during the third quarter of 2018 to $23.55 per square foot. The overall average Class A rental rate decreased from $27.75 per square foot last quarter of 2018 to $25.43 per square foot. Overall market rental rates are expected to rise as new office construction is completed.
The Collier report predicted that “as high-quality space continues to be delivered to the market, that the rental rate is expected to increase with the quality of office space being offered.” The report also indicated that “this negative absorption of 77,251 square feet and rise in vacancy rate is not an indication of a weak office market… It will take a few quarters for the demand to catch up to the supply.”
Central Business District
The central business district of Charleston has 86 buildings totaling 2,727,015 square feet. Since there was no new construction in the downtown Charleston office market the last quarter of 2018, the vacancy rate dropped from 6.86 percent during the third quarter of 2018 to 6.66 percent in the fourth quarter. The average weighted rental rate dropped slightly to $32.29 per square foot at the end of 2018.
The Charleston suburban office market has 292 office buildings totaling 10,458,323 square feet and five new office buildings. A new 48,000 square foot building has been built on Daniel Island and four new offices totaling 126,181 square feet were built in Mount Pleasant. The demand for office space continues to increase in the suburbs as do the rental rates.
Carolina Services Inc., (CSI) is Charleston’s premier commercial space planning and improvement company. Contact CSI to see how we can help design, manage and implement innovative and cost-effective solutions for your commercial space.