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Grubb & Ellis Reports on Charleston Office Market

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Slow housing market hits office developments

April 29, 2008

By Daily Journal Staff

The housing slowdown is having an effect on the office market in the Charleston area, with net absorption slowing notably during the last quarter.

A recent report on office market trends released by commercial real estate company Grubb & Ellis Barkley Fraser shows that developers have responded by curbing development, resulting in office space vacancies during the past quarter below 20% in nearly all submarkets, which is favorable given the drop in demand.

The North Charleston submarket is an exception because of two recent projects that have added to office inventory and driven up vacancy to 22%.

Rents also have been affected, as increased competition is requiring landlords to offer incentives to encourage tenants to renew leases and keep them from being lured away to less expensive locations.

The change in vacancy rates and asking rents has not been dramatic, however. The office market apparently is taking a measured approach to development and adjusting to the market downturn.

The downtown Charleston central business district appears to be the one submarket that is immune to market conditions, reporting a 6.4% vacancy rate for office space during the past quarter. The supply of office space in this area has been reduced in recent quarters and planned projects are some time away from completion. Strong occupancy rates in downtown Charleston are projected to continue for several quarters.

Submarkets and vacancy rates for the Charleston area during the past quarter were reported as follows:

Downtown central business district: 6.4%.
Daniel Island: 18.4%.
West Ashley: 19.3%.
Mount Pleasant: 19.8%.
North Charleston: 22%.

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