SOUTHEAST SNAPSHOT, MARCH 2010

Columbia Office Market

In the current commercial real estate landscape, the Columbia office market is finding stability in its small stature. While the market, which totals 11 million square feet, never really caught fire in the low-and-loose real estate boom years, modern-day Columbia brokers have yet to experience any sharp negative backlash due to the recession. In fact, the office market experienced positive absorption and an increase in average rental rates last year. 

“In the incredibly good times, Columbia was rocking along at a very slow pace, whereas other markets were going gangbusters. In a weak market, we still have decent activity. We don’t see the peaks and the valleys,” says David Lockwood of Colliers Keenan’s Columbia office. “Somehow we have managed to remain fairly consistent in our level of activity over the past 2 years.”

One of the most active submarkets during this time was the central business district. Tenants located downtown to be close to state government offices and moved into properties proximate to the hospitals that populate the area. In general, businesses choose Columbia because of its location in the middle of South Carolina — Lockwood says it’s easy for a firm to reach the entire state from a Columbia perch. The University of South Carolina and Fort Jackson also help boost the office market. 

“We continue to see new companies that are moving to Columbia, and those are primarily healthcare related, insurance related and government contractors,” he says. “Because we’re the state capital, we always see a good positive influx of companies.”

One of the most significant new developments is The Tower at Main & Gervais. The 18-story property opened at the end of December across the street from the capitol building. Atlanta-based Holder Properties developed the building, which will house Edens & Avant, the law firm McNair and the National Bank of South Carolina. The new building created vacancy elsewhere downtown, illustrating one current issue in the market — when companies move into space across town and there’s no one to pick up the slack, the occupancy rate goes down. In September, SCANA Corporation moved out of its 460,000-square-foot downtown location to a campus in the suburbs. This lowered the market’s occupancy rate to the high seventies. That’s a startling number, Lockwood says, but the reality is much easier to swallow.

“It looks dismal, but that 460,000 square feet is not competing in multi-tenant markets yet,” he says. “It’s a big animal that we’ve got to deal with right now. Until somebody says it’s going to be a multi-tenant office building, it’s just a building that is for sale.”

SCANA’s move spiked activity in the suburbs, a nice boost in an area that hasn’t seen many transactions or development in last few years. Historically, industries tied to residential growth have located in the suburbs, and once residential development ceased, companies no longer looked at the suburbs as a viable option. This trend, however, will slowly start to change.

“We’ll see rents decline in our suburban markets as those owners get a little more aggressive in trying to attract tenants,” Lockwood says. “Once those rents start falling a little bit, I actually think you’ll start to see some tenants who are in downtown Columbia start to move out to the suburbs.”  

— Jon Ross

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