Q2 2011 | OFFICECOLUMBIA, SOUTH CAROLINARESEARCH & FORECAST REPORT                                            Activity in ...
RESEARCH & FORECAST REPORT | Q2 2011 | OFFICE | COLUMBIADEFINITIONSAbsorption (Net) The net change in occupied     Columbi...
RESEARCH & FORECAST REPORT | Q2 2011 | OFFICE | COLUMBIA                                                               Dir...
RESEARCH & FORECAST REPORT | Q2 2011 | OFFICE | COLUMBIAfor landlords to accommodate parking       experienced prior to th...
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Columbia Real Estate Office Report - 2Q 2011

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Columbia Real Estate Office Report - 2Q 2011

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Columbia Real Estate Office Report - 2Q 2011

  1. 1. Q2 2011 | OFFICECOLUMBIA, SOUTH CAROLINARESEARCH & FORECAST REPORT Activity in the Columbia, South Carolina, office market continued to show promise of economic recovery as leasing activity expanded into the suburban markets during the second quarter of 2011. The majority of the leasing volume during the previous three quarters was primarily limited to the Central Business District due to the aggressiveness of downtown landlords to attract and retain tenants. During the second quarter of 2011, however, CBD rental rates started to increase for the first time in 18 months, while suburban rates further declined by an average of $0.58 per square foot. This divergence of rental rates between the CBD and suburban markets can be largely attributed to suburban landlords being more aggressive in rental rates to capture tenant activity. Absorption in the suburbanMARKET INDICATORS markets totaled 37,461 square feet during in the second quarter of 2011. Q2 2011 Forecast Leasing activity in the suburban markets was largely concentrated in Columbia’s VACANCY largest suburban submarket, St. Andrews. This positive absorption is noteworthy because the St. Andrews area had experienced a continual decline in occupancy NET ABSORPTION from the onset of the last economic downturn through the first quarter of 2011. CONSTRUCTION — — Renewed activity in this submarket signals an encouraging trend in traditional suburban office space primarily occupied by regional and national corporate RENTAL RATE — — tenants. 2003 - 2011 Vacancy Rates 30.00% 30.00% 25.00% 25.00%QUICK UPDATES 20.00% 20.00%• THE ST. ANDREWS MARKET EXPERIENCED POSITIVE ABSORPTION FOR THE FIRST TIME 15.00% 15.00% SINCE THE ONSET OF THE RECESSION 10.00% 10.00%• TENANTS REMAIN VALUE CONSCIENCE IN THEIR DECISIONS AND ARE ASKING FOR HIGHER QUALITY FINISHES 5.00% 5.00%• LANDLORDS WHO ARE AGGRESSIVE 0.00% 0.00% WITH RENTAL RATES ARE EXPERIENCING Q203 Q204 Q205 Q206 Q207 Q208 Q209 Q210 Q410 Q211 GREATER ACTIVITY CBD Class A Vacancy CBD Vacancy Market Vacancywww.colliers.com/columbia
  2. 2. RESEARCH & FORECAST REPORT | Q2 2011 | OFFICE | COLUMBIADEFINITIONSAbsorption (Net) The net change in occupied Columbia’s Central Business District demonstrated aggressiveness inspace over a given period of time, calculated experienced a 17,238-square-foot attracting tenants. Tenants haveby summing all the positive changes in decline in occupied space during the remained value-conscience in searchingoccupancy and subtracting all the negative second quarter of 2011. This negative for space and continue to work towardschanges in occupancy. absorption can be largely attributed to increasing efficiencies, thereby reducingVacancy Rate A percentage of the total downsizing by the South Carolina state square footage requirements and rentalamount of physically vacant space divided by government, which is an anticipated expenses. Office users are nowthe total amount of existing inventory. result of the state’s continued financial increasing the number of employees per pressure to cut operational expenses. square foot of space, sometimes by asVacant Space Space that is not currentlyoccupied by a tenant, regardless of any lease Although the CBD experienced an much as 25% more than levelsobligation on the space. overall decline in occupied space during traditionally experienced. With the the second quarter, activity among perception of a “buyer’s market” stillSublease Space Space that has been leased private sector tenants remained strong present, landlords should be cautiousby a tenant and is being offered for lease as the insurance and legal sectors about raising asking rental rates.back to the market by the tenant with thelease obligation. continued to expand. Activity among these sectors should result in positive As employers look to increaseDeliveries Buildings that complete absorption in the coming quarters.construction during a specified period of efficiencies, and with more employeestime. A certificate of occupancy must have per office, the demand for parkingbeen issued for the property for it to be Leasing activity during the second spaces required per square foot ofconsidered delivered. quarter was much stronger in office space leased will rise. As this demand properties where landlords increases, it will become more difficultLeasing Activity The volume of squarefootage that is committed to and signedfor under a lease obligation for a specific Columbia, South Carolina Office Submarketsbuilding or market in a given period of time.It includes direct leases, subleases andrenewals of existing leases. It also includesany pre-leasing activity for buildings underconstruction or planned.Build-to-Suit A term describing propertythat was developed specifically for a certaintenant to occupy. Can be either leased orowned by the tenant.Average Asking Rental Rate Rental ratesare calculated based on a weighted averageof available space in each submarket.Therefore, fully leased buildings do notimpact the average asking rate within themarket, and properties with large blocks ofavailable space have greater influence onmarket rates.P. 2 | COLLIERS INTERNATIONAL
  3. 3. RESEARCH & FORECAST REPORT | Q2 2011 | OFFICE | COLUMBIA Direct Vacancy Six Month AverageMARKET UPDATES Buildings Inventory Direct Vacant Vacancy Sublease Total Vacant Rate Absorption Asking Rate Rate Mid Year 2010CBDA 12 2,004,680 279,374 13.9% 67,368 346,742 13.1% (12,506) $19.52B 17 1,616,799 182,247 11.3% 42,506 224,753 10.5% (17,453) $16.40C 27 1,424,707 630,794 44.3% - 630,794 46.3% 12,721 $15.87Total 56 5,046,186 1,092,415 21.6% 109,874 1,202,289 21.2% (17,238) $16.89SUBURBAN SECTION:CAYCE/WEST COLUMBIAA 2 63,000 14,400 22.9% - 14,400 32.2% 5,900 $18.67B 8 296,928 26,802 9.0% - 26,802 10.8% 5,335 $13.07C 5 147,889 40,016 27.1% - 40,016 28.3% 1,847 $12.03Total 15 507,817 81,218 16.0% - 81,218 18.6% 13,082 $13.55EAST COLUMBIA(DEVINE STREET)Total (Class C Only) 6 84,483 17,006 24.6% - 17,006 24.59% 5,632 $10.99FOREST ACRESA 1 23,700 1,500 6.3% - 1,500 7.4% 250 $17.00B 7 305,725 86,250 28.2% - 86,250 31.6% 10,253 $15.82C 11 393,632 65,961 16.8% - 65,961 14.3% (9,813) $13.64Total 19 723,057 153,711 21.3% - 153,711 21.4% 690 $14.90NORTHEASTA 8 399,292 78,674 19.7% - 78,674 14.6% (20,459) $16.33B 9 595,113 89,769 15.1% - 89,769 15.6% 3,366 $15.10C 7 209,967 56,920 27.1% - 56,920 23.3% 2,734 $12.15Total 24 1,204,372 225,363 18.7% - 225,363 16.6% (14,359) $14.79ST ANDREWSA 5 402,472 52,411 13.0% - 52,411 16.09% 12,334 $17.04B 20 1,089,298 167,959 15.4% - 167,959 18.15% 20,316 $14.00C 16 855,169 233,669 27.3% - 233,669 27.96% 5,398 $11.77Total 41 2,346,939 454,039 19.3% - 454,039 21.37% 38,048 $13.20SUBURBAN TOTALA 16 888,464 146,985 16.5% - 146,985 16.3% (1,975) $16.82B 44 2,287,064 370,780 16.2% - 370,780 18.3% 39,270 $14.62C 45 1,606,657 396,566 24.7% - 396,566 24.0% 166 $12.16Total 105 4,782,185 914,331 19.1% - 914,331 19.9% 37,461 $13.91MARKET TOTALA 28 2,893,144 426,359 14.7% 67,368 493,727 14.0% (14,481) $18.59B 61 3,903,863 553,027 14.2% 42,506 595,533 15.3% 21,817 $15.21C 72 3,031,364 1,027,360 33.9% - 1,027,360 34.2% 12,887 $14.44Total 161 9,828,371 2,006,746 20.4% 109,874 2,116,620 20.6% 20,223 $15.53 COLLIERS INTERNATIONAL | P. 3
  4. 4. RESEARCH & FORECAST REPORT | Q2 2011 | OFFICE | COLUMBIAfor landlords to accommodate parking experienced prior to the last economicneeds. Thus, landlords that control downturn due to many tenants’ desiretheir own parking and buildings that to increase efficiencies and reduce their 480 offices inoffer free parking will likely have anadvantage in attracting tenants. square footage requirements. 61 countries on Rental rates will likely remain stable 6 continentsAlong with increased efficiencies, across the Columbia market through the United States: 135tenants have started requesting higher end of 2011, although fluctuations will Canada: 39quality finishes in their respective occur as landlords work to aggressively Latin America: 17spaces. Increased tenant improvement attract and retain tenants. This trend Asia Pacific: 194 EMEA: 95costs for higher quality finishes have will likely continue in the suburbanresulted in longer lease commitments markets into 2012, but the CBD will • $1.6 billion in annual revenuefrom tenants. Many of the significant likely see consistent increases in asking • 672.9 million square feet undertransactions that have occurred thus far rates within six to nine months. managementin 2011 have lease terms beyond the • Over 15,000 professionalstypical five-year term, extending to Demand for office space in the third andseven- to 10-year terms. This is of fourth quarters of 2011 will be primarily FOR MORE INFORMATION:particular importance in the long-term concentrated in the Class A and Class Bforecast because the traditional five- David C. Lockwood, III, CCIM, SIOR markets, where tenants are able to get Senior Vice Presidentyear turnover experienced in Columbia quality space at what is perceived to be South Carolinawill not be as substantial in 2015 and a good value. Landlords who have 1301 Gervais Street2016. Suite 600 invested in improvements to their Columbia, South Carolina 29201 properties, including upgrades to TEL +1 803 401 4211The Columbia office market will common areas and amenities, will FAX +1 803 401 4211continue to expand through the end of experience a higher level of interest in2011, although absorption in the third their respective properties. Ryan Hyler, LEED Green Associatequarter may be nominal due to limited Vice President | Research & Marketingactivity during the summer months. South Carolina 1301 Gervais StreetWhile activity is expected to increase Suite 600along with job growth, absorption Columbia, South Carolina 29201numbers will likely not reach the levels TEL +1 803 401 4269 FAX +1 803 401 4269 This market report is a research document of Colliers International. Information herein has been deemed reliable and no representation is made as to the accuracy thereof. Colliers International South Carolina, Inc., and certain of its subsidiaries, is an independently owned and operated business and a member firm of Colliers International Property Consultants, an affiliation of independent companies with over 480 offices throughout more than 61 countries worldwide. Accelerating success.www.colliers.com/columbia

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