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Research &

Forecast Report

CHARLESTON, SC | OFFICE
Q3 2017

Vacancy Remains at Historic Lows


Ron Anderson Vice President of Administration | South Carolina

Key Takeaways Market Indicators Q3 2017 Q4 2017*


Relative to prior period
>> Tight market conditions continue, with historically low vacancy rates.
VACANCY
>> Rental rate growth is exceptionally strong across the market.
NET ABSORPTION
>> Investors purchased several buildings for record prices.
CONSTRUCTION
Market Conditions
RENTAL RATE**
The vacancy rate at the end of the third quarter of 2017 was 7.4%, down
Note: Construction is the change in Under Construction.
from 7.9% at the end of last quarter. Market-wide, 63,000 square feet *Projected
were absorbed, with no new buildings added to the supply in the quarter. **Rental rates for current quarter are for CBD. Rent forecast is for metro-wide rents.
The average asking rental rate at the end of the third quarter of 2017 was
$26.92 per square foot per year full service. Since the third quarter of
2016, the overall rental rate had increased 14.3% from $23.55 per square Summary Statistics
foot per year full service. Q3 2017 Charleston Office Market Market CBD Suburban

Vacancy Rate 7.41% 6.08% 7.76%


Downtown Conditions
Change From Q2 2017
-50 -131 -29
The vacancy rate in the downtown submarket was 6.03% at the end of the (basis points)

third quarter. The full-service average asking rental rate in the submarket Absorption
63.1 33.4 29.6
(Thousand Square Feet)
reached $34.81 per square foot per year full service at the end of the third
quarter, up from $30.83 per square foot per year full service in the third New Construction
0 0 0
(Thousand Square Feet)
quarter of 2016. Class A space saw even higher asking rental rates, with
an average of $36.85 per square foot per year full service, an increase Under Construction
417 88 329
of 2.5% from a year ago. The only building under construction is Courier (Thousand Square Feet)

Square, an 88,000-square foot office, which is fully preleased by Greystar.


Asking Rents
Suburban Conditions Per Square Foot Per Year

The suburban vacancy rate dropped to 7.76% at the end of the third
quarter from 8.06% the second quarter, with nearly 27,000 square feet Overall $26.92 $34.81 $24.27
absorbed. Most of the positive absorption occurred in the Upper North
Change From Q3 2016 14.3% 12.9% 7.6%
Charleston submarket. The suburban full-service average asking rental
rate has increased 7.6% from $22.55 per square foot per year full service Class A $30.35 $36.85 $27.14
to $24.27 per square foot per year since the third quarter of 2016. Class Change From Q3 2016 10.1% 2.5% 4.4%
A space increased 4.4% from $25.98 per square foot per year full service
to $27.14 per square foot per year full service over the same period.
Construction and redevelopment remained strong in the suburban markets
with a total of four buildings under construction.

Significant Transactions
Leasing activity was significant in Charleston during the third quarter.
According to CoStar, 115 office leases were completed, with the majority
between 2,500 and 4,500 square feet. With occupancy at historic highs
and continuing barriers to new development, tenants and landlords are
Albemarle Pointe Center | Charleston, South Carolina
creatively evaluating every opportunity to create office space. Sales in the
market continue to be strong as well. Several properties sold with values
approaching those in second-tier markets like Charlotte and Atlanta.

Sales
>> The Albemarle Pointe Center, a 73,000-square-foot building in the
West Ashley submarket, sold for $19.5 million, or $267 per square
foot.
>> The Rivergate Center II sold for $9.9 million. This 72,000-square-foot
building traded for $138 per square foot, more than double its sales
price three years earlier.
>> Nexton I at 201 Sigma Drive, a 95,058-square-foot Class A building,
sold for $17.2 million, or $181 per square foot.
>> Rivers Park Business Center, a 158,500-square-foot fully leased Source: CoStar
converted retail center in the North Charleston submarket, was
purchased for $14.75 million or $93 per square foot.
Belle Hall | Charleston, South Carolina
Leases
>> T-Mobile leased 126,423 square feet at 8571 Rivers Avenue in a
recently closed K-Mart in the Upper North Charleston submarket.
>> Benefitfocus leased 25,293 square feet at 5935 Rivers Avenue in the
Upper North Charleston submarket.
>> The Charleston County Assessor leased 19,669 square feet at 3875
Faber Place Drive.

Construction Pipeline
Construction activity remains high in the Charleston market, with 417,000
square feet under construction. Several other buildings were proposed
throughout the region. Developers continue to wait for enough space to be
preleased before beginning construction. Source: Colliers International

Under Construction
>> Courier Square, a mixed-use project on King Street in the Downtown
submarket, should be complete in 2018. Blackbaud | Charleston, South Carolina
>> On Daniel Island, Holder Properties continues construction on
Blackbaud’s 172,000-square-foot building.
>> Holder Properties is also developing a 106,000-square-foot building
in the Lower North Charleston market at the Faber Place Office Park.
>> 880 Island Park, a 33,000-square-foot building, and 145 Riverland, a
18,000-square-foot building, are under construction on Daniel Island.

Market Forecast
Overall, market conditions continue to be extremely tight. Tenants are
struggling to find space market-wide. While 417,000 square feet are
under construction, most of it is preleased. This is encouraging the
redevelopment of non-traditional space into office space – especially in
the North Morrison portion of the Downtown submarket. Construction
costs remain high, and the time from a proposed building to occupancy Source: CoStar
is lengthening. The good news is there are several planned projects
ready to begin construction as soon as enough of the building is
preleased.

2 South Carolina Research & Forecast Report | Q3 2017 | Charleston Office | Colliers International
Q3 2017 Office Market Summary Statistics
Charleston, SC
INVENTORY DIRECT VACANT SUBLEASE VACANT TOTAL VACANT TOTAL VACANCY NET ABSORPTION AVERAGE ASKING
MARKET BUILDINGS
(SF) (SF) (SF) (SF) RATE (%) (SF) RENTAL RATE (SF/YR)

DANIEL ISLAND
Class A 17 912,497 11,806 0 11,806 1.29% 5,910 $28.83
Class B 18 443,780 2,550 4,000 6,550 1.48% 7,156 $18.92
Class C 3 78,716 13,893 700 14,593 18.54% -2,421 $23.25
Daniel Island Total 38 1,434,993 28,249 6,700 32,949 2.30% 10,645 $26.76
DOWNTOWN CHARLESTON
Class A 18 1,081,569 66,643 14,521 81,164 7.50% 14,221 $36.85
Class B 29 1,022,400 36,016 0 36,016 3.52% 18,018 $28.56
Class C 23 449,709 16,290 20,528 36,818 8.19% 1,247 $29.17
Downtown Total 70 2,553,678 118,949 35,049 153,998 6.03% 33,486 $34.81
LOWER NORTH CHARLESTON
Class A 15 879,901 33,541 11,399 44,940 5.11% -2,028 $26.00
Class B 28 1,239,950 27,539 18,764 46,303 3.73% 33,268 $23.38
Class C 19 598,794 74,127 0 74,127 12.38% -25,376 $20.33
Lower North Charleston Total 61 2,718,645 135,207 30,163 165,370 6.08% 5,864 $23.07
MT. PLEASANT
Class A 20 623,426 11,477 6,303 17,780 2.85% -5,192 $26.74
Class B 56 1,023,800 20,944 762 21,706 2.12% 7,906 $26.61
Class C 9 177,864 1,090 0 1,090 0.61% 2,310 $22.40
Mt. Pleasant Total 85 1,825,090 33,511 7,065 40,576 2.22% 5,024 $26.65
SUMMERVILLE/GOOSE CREEK
Class A 2 175,000 43,923 0 49,923 25,10% 13,577 $28.00
Class B 20 323,740 18,205 0 18,205 5.62% -7,772 $23.77
Class C 16 265,181 4,200 0 4,200 1.58% 2,500 $18.44
Summerville/Goose Creek Total 38 763,921 66,328 0 66,328 8.68% 8,305 $25.78
UPPER NORTH CHARLESTON
Class A 12 808,212 132,236 0 132,236 16.36% 6,878 $26.52
Class B 15 611,694 40,092 0 40,092 6.55% 37,686 $20.88
Class C 24 830,882 126,164 0 126,164 15.18% -7,108 $18.44
Upper North Charleston Total 51 2,250,788 298,492 0 298,492 13.26% 37,456 $25.78
WEST ASHLEY
Class A 4 257,811 59,285 0 59,285 23.00% 0 $29.22
Class B 17 647,665 118,183 0 118,183 18.25% -41,400 $22.88
Class C 9 186,583 1,925 0 1,925 1.03% 3,728 $17.21
West Ashley Total 30 1,092,059 179,393 0 179,393 16.43% -37,672 $24.66
SUBURBAN SUBMARKETS
Class A 70 3,656,847 292,268 17,702 309,970 8.48% 19,145 $27.14
Class B 153 4,290,629 227,513 23,526 251,039 5.85% 36,844 $22.97
Class C 80 2,138,020 221,399 700 222,099 10.39% -26,367 $19.28
Suburban Submarkets Total 303 10,085,496 741,180 41,928 783,108 7.76% 29,622 $24.27
MARKET
Class A 88 4,738,416 358,911 32,223 391,134 8.25% 33,366 $30.35
Class B 182 5,313,029 263,529 23,526 287,055 5.40% 54,862 $23.78
Class C 103 2,587,729 237,689 21,228 258,917 10.01% -25,120 $20.79
Market Total 373 12,639,174 860,129 76,977 937,106 7.41% 63,108 $26.92

3 South Carolina Research & Forecast Report | Q3 2017 | Charleston Office | Colliers International
396 offices in FOR MORE INFORMATION:
Liz H. McCary

68 countries on Director of Marketing | South Carolina


+1 803 401 4269
Liz.McCary@colliers.com

6 continents Ron Anderson


Vice President, Administration | South Carolina
United States: 153 +1 803 401 4234
Ron.Anderson@colliers.com
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Asia Pacific: 79
Mike Palmer | Brokerage Associate
EMEA: 111 +1 843 518 6087
Mike.Palmer@colliers.com

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