SOUTHEAST SNAPSHOT, FEBRUARY 2005

Columbia, S.C., Office Market

David Lockwood III, SIOR, CCIM Senior Vice President and Principal Colliers Keenan Inc.

During the past 12 months, Columbia, South Carolina, has experienced a balanced level of development in the market, adding 350,000 square feet of office space in the central business district in a signature development called Meridian. The suburban market has not delivered any newly constructed buildings in 2004, as there was more than 150,000 square feet of suburban space added in 2003, thereby providing an ample supply of new Class A construction.

With Columbia’s newest tower, Meridian, the office market in the CBD stands at 85 percent occupied and Class A space is 88.4 percent occupied. For 2005 and 2006, it appears there will continue to be a resurgence in Class A space in the CBD. One new office tower consisting of 170,000 square feet has just begun construction and will be completed in 2006. The First Citizens Bank Building will be the headquarters for the bank, containing virtually no third-party lease space. Additionally, plans have been announced for a plan of more than 350,000 square feet of office space to be built in 2005 and 2006. This development will consist of two buildings to be built in the highly popular Vista area of downtown Columbia.

The University of South Carolina (USC), located in the heart of Columbia, also has formalized plans for a research campus to be built on the main campus in downtown Columbia. Long-range plans call for more than 5 million square feet of institutional, research and administrative space to be completed over 10 years. USC’s ambitious research campus may also spawn additional private investment within the area.

The majority of new development in Columbia is taking place in the downtown area. Within the downtown area, three pockets are experiencing tremendous change. The Main Street corridor, the Vista and the USC campus are each experiencing a unique renaissance, which is shaping the core of the Columbia region.

In 2003, Miller Valentine Group developed The Berkeley Building, a 76,000-square-foot suburban mid-rise office building. In 2004, Holder Properties completed Meridian, consisting of 350,000 square feet. Craig Davis Properties has established a strong presence in the market due to their work with USC and the research campus. Additionally, there have been many noted office property sales occurring in 2004 with several institutional owners purchasing their first Columbia asset and showing a strong interest in this market.

Over the past several years, law firms operating in the Columbia market have accounted for much of the expansion of the office market in the CBD. Several of the area’s largest law firms have expanded by an average of 8 percent per year, primarily in Class A space, thereby creating a higher demand for Class A properties and increasing the occupancy of Class A space in the CBD to 88.4 percent.

Several large lease transactions were completed in 2004, most of which involved CBD properties. Bank of America completed its consolidation into approximately 85,000 square feet in Bank of America Plaza. Nelson Mullins Law Firm moved into its new headquarters, Meridian, taking 150,000 square feet. Wilbur Smith Associates extended its lease for 70,000 square feet in The Tower at 1301 Gervais.

Full-service Class A rental rates in Columbia range from $17.50 to $23.50 per rentable square foot. For a typical lease term of 5 years, the average rental rate will range from $18 to $24 per rentable square foot.

The Columbia office market was 80.1 percent occupied at year-end 2004 with Class A space being 86 percent occupied. The occupancy rate at year-end 2004 for CBD space is 85 percent with Class A space being 88.4 percent occupied. The suburban market occupancy rate stands at 75.4 percent while Class A space in the suburbs is 82.6 percent occupied.

With the improving job market in Columbia, the area to watch is the northeast Columbia market. The northeast market currently stands at 76.8 percent occupancy. However, with a number of good Class A and B space options available at affordable rental rates, coupled with one of the fastest growing residential and commercial real estate markets in the Midlands, this market should experience excellent absorption of vacant office space in the coming 12 months. Secondly, the Columbia market will continue to see strength of the office market in the Vista area of the CBD. The appeal of this segment of downtown Columbia will be very strong but may hamper the resurgence in development on Main Street in Columbia.

— David Lockwood III, SIOR, CCIM, senior vice president and principal, Colliers Keenan Inc.

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