Build It and They Will Come The office market continues to thrive but there are more changes on the horizon. is experiencing record high lease rates with vacancy consistently below 10% throughout all submarkets. Vacancy rates have been historically low in downtown over the past few years, but tenants have more options than ever, causing many to rethink their long-term plans. Many projects currently under construction in the West Suburbs, East Suburbs and North submarkets are starting to see increased leasing activity as construction nears completion. These new developments are providing additional options in more attractive locations, offering tenants new alternatives. This newer product is influencing tenants long-term decisions regarding the future of their organizations. Occupiers historically located downtown are looking at newer options in the East, West and North submarkets that are not only newer spaces, but also provide ample parking, more flexible floor plans and often an easier commute for their work force. These projects were added to the overall inventory in past quarters but we are only now seeing leasing activity as the buildings come out of ground. We will continue to experience shifts in the market as construction nears completion. This newer product has also attracted larger tenants from outside of the area, something not seen in recent years. This movement into the newer buildings in the East, West and North submarkets is causing a slow down in leasing activity in other submarkets, mainly the Downtown submarket. Often, these developments offer superior product. This will encourage existing property owners in all submarkets, but specifically downtown, to consider investing in their buildings to maintain their current tenants or risk losing them to these new developments. It is anticipated that owners will continue to add additional capital to their investments to ensure a strong tenant base and to increase the value of their properties in order to compete with the newer product, otherwise their tenants will vacate in favor of more practical and cost effective solutions elsewhere. While vacancy rates remain low, there may continue to be a shift in activity to newer developments throughout all submarkets. Tenants will continue to have alternative choices in the marketplace and landlords must take notice or risk losing significant income.
Market Facts 19,546,094 sf 9.4% $33.43 psf Inventory Submarket Indicators Downtown 4,771,626 4,771,626 4,760,061 4,760,601 4,760,601 3.1% 3.2% 3.6% 3.3% 3.8% 4.8% 4.3% 3.3% 4.3% 5.4% $42.22 $42.55 $41.55 $40.89 $41.51 6,873 30,502 (15,678) 24,277 6,624 East Suburbs 4,163,813 4,163,813 3,979,813 3,969,613 3,925,613 6.3% 8.0% 6.5% 3.4% 11.3% 9.3% 12.1% 12.7% 7.9% $36.80 $36.38 $37.09 $37.33 $35.62 (91,526) 240,690 (52,046) (81,552) 55,664 North 7,045,132 7,045,132 9.2% 6.7% 6.7% 4.6% 5.1% 9.3% 7.7% 7.2% 7.8% $30.51 $31.69 $31.81 $30.66 $30.43 (183,130) (2,452) 155,151 31,886 (1,421) North Suburbs 1,662,326 1,652,326 4.1% 5.5% 8.6% 7.8% 9.5% 9.7% 15.1% 14.1% 14.3% $26.47 $26.84 $27.01 $26.74 $29.12 West Suburbs 24,504 51,400 64 20,416 (4,882) 9.5% 10.1% 10.9% 11.6% 13.7% 11.7% 12.0% $33.18 $33.75 $32.26 $32.50 $32.57 17,561 (8,566) 13,036 (4,080) (16,901)
Market Overview Tri-County Area 19,546,094 19,546,094 19,351,069 19,004,869 18,950,869 6.0% 6.6% 5.5% 5.2% 9.4% 8.6% 8.9% 8.4% $33.43 $33.71 $33.52 $33.48 $33.03 (225,718) 311,574 100,527 (9,053) 39,084 Net Submarket Map Summerville Ladson Goose Creek North Daniel Island West Ashley Mount Pleasant Johns Island James Island Tri-County Submarkets Downtown East Suburbs North North Suburbs West Suburbs
s 10% 9% 8% 7% 6% $34 $33 $33.43 400,000 300,000 200,000 100,000 0-100,000 2Q17 5% 2Q17 $32 2Q17-200,000-300,000 (225,718) Notable Lease Transactions Tenant Type Address Market SF Ogletree Deakins Nash Smoak Original 211 King Street Downtown 34,688 Ingevity Renewal 4401 Belle Oaks Drive North 25,449 Executive Offices Original 201 Sigma Drive North Suburbs 9,928 US 1 Industries, Inc. Renewal 950 Houston Northcutt Blvd East Suburbs 6,280 CGI Original 4401 Leeds Place W North 5,497 Earthart Overstreet Law Firm Original 878 Whipple Road East Suburbs 3,015 Remedy Internal Medicine and Wellness Original 3417 Maybank Highway West Suburbs 2,700 Notable Sales Transactions Buyer Price Address Market SF Greenville Corporate, LLC $11,907,424 5955 Core Road North 52,511 Greenville Corporate, LLC $10,660,000 2457 W Aviation Avenue North 48,479 Greenville Corporate, LLC $6,892,387 2431 W Aviation Avenue North 30,395 Douglas T and Steven J Sher, LLC $2,525,000 496 Bramson Court East Suburbs 21,062 Sherman Financial Group, LLC $1,893,750 88 Broad Street Downtown 6,000 Trends to Watch Rental Rates Rental rates remain high. Tenant Movement Tenant movement within market. Vacancy Vacancy will shift with tenant movement around market.
Office Terms and Definitions Total Square Footage Office inventory includes all multi-tenant and single tenant buildings at least 10,000 square feet. Office Buildings Classifications Avison Young adheres to the BOMA guidelines. Class A properties are the most prestigious buildings competing for premier office users with rents above average for the area. Class B properties compete for a wide range of users with rents in the average range for the area. Class C buildings compete for tenants requiring functional space at rents below the area average. Vacancy and Availability The vacancy rate is the amount of physically vacant space divided by the inventory and includes direct and sublease vacant. The availability rate is the amount of space available for lease divided by the inventory. Net The net change in physically occupied space over a period of time. Asking Rent The dollar amount asked by landlords for available space expressed in dollars per square foot per year in most parts of the country. Office rents are reported full service where all costs of operation are paid for by the landlord up to a base year or expense stop. Operating expenses, taxes and insurance are a total market average and the amount is adjusted annually for this report. Specific submarket expenses are available upon request. The asking rent for each building in the market is weighted by the amount of available space in the building. This has the effect of causing rental rates on larger spaces to affect the average more than that of smaller spaces. The weighted average asking rental rate is calculated by taking the ratio of the square footage associated with the rental rate on each individual available space to the square footage associated with rental rates on all available spaces, multiplying the rental rate by that ratio, and then adding together all the resulting numbers. Asking rental rate averages only includes Direct Space that is being offered for lease directly from the landlord or owner of a building and does not include Sublet Space that is being offered by another tenant trying to sublet a space that has already been leased. Contact Information Chris Fraser, CCIM Principal, Managing Director 843.452.9425 chris.fraser@ Gerry Schauer, CCIM 843.364.2055 gerry.schauer@ Gregg Legerton 843.830.7236 gregg.legerton@ Jeremy N. Willits Senior 843.270.9205 jeremy.willits@ Kisha Lyles Associate 864.426.5937 kisha.lyles@ Leslie Fellabom Senior 843.442.7492 leslie.fellabom@ Nick Tanana 240.793.4580 nick.tanana@ William Ederle Associate 781.987.4632 william.ederle@ For more information on this report, please contact: Charlene Aydelotte Massey Business Operations Manager, Researcher 843.725.7200 charlene.massey@ 1315 Ashley River Road, South Carolina 29407 United States Researcher Comments Market research data and transaction information is now provided by CoStar. 2018 Avison Young - South Carolina, Inc. All rights reserved. E. & O.E.: The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Avison Young.