Q1 2024 Charleston Office Market Report

CHARLESTON OFFICE MARKET REPORT

Q1 MARKET SNAPSHOT

15,526,243 SF

Q1 HIGHLIGHTS & TRENDS

• CONTINUED POPULATION GROWTH AND BUSINESS RELOCATIONS TO THE REGION ARE BRINGING FAVOR TO THE OFFICE MARKET.

• THE OFFICE MARKET SAW AN INCREASED AMOUNT OF TENANT ACTIVITY THROUGHOUT Q1.

• VACANCY IS DECREASING, RENTAL RATES ARE INCREASING AND DEVELOPMENT IS LIMITED.

• INVESTMENT VALUES ARE ADJUSTING TO THE HIGHER INTEREST RATES AND HIGHER OPERATING COSTS.

• TENANTS ARE FAVORING WELL-MAINTAINED, MODERN BUILDINGS WITH INTERNAL AMENITIES OR WITHIN WALKING DISTANCE TO AMENITIES.

• THE LATEST WAVE OF NEW CLASS “A” OFFICE BUILDINGS IN DOWNTOWN CHARLESTON ARE ACHIEVING RECORD RENTS AND HITTING HIGH OCCUPANCY LEVELS.

OFFICE TENANT ACTIVITY INCREASES

WAVE OF OFFICE BUILDINGS DOWNTOWN LEASING QUICKLY Q1 RECAP

• 2024 began with an increase in office tenant activity centered around growth in the homebuilding and financial service sectors due to more people moving to the Charleston region.

• Additionally, a movement of ‘back to office’ is happening as more remote workers shift from working from home to working back in the office.

• Executive office space, such as Concept and Office Evolution, are witnessing high occupancy rates as more small businesses are getting off the ground.

• These trends reflect the recent decrease in vacancy in the first quarter to 13.3%.

• Rental rates are also trending higher. Downtown rents are in the mid to high forties, full service, for new Class “A” space with parking costs of $165-$225 per space per month.

• Asking rents for office space in suburban submarkets are expected to follow suit with rent likely to rise during 2024-2025.

A CASE FOR NEW OFFICE DEVELOPMENT

• The majority of new office developments that commenced construction before or during COVID are close to full occupancy.

• Overall vacancy is showing a downward trend and development is limited, however, rental rates will need to continue to increase to justify new construction.

• The challenge for office development in the Charleston region is that development costs and operating expenses, specifically taxes and insurance, coupled with ongoing inflation, have dramatically increased over the last few years, while coinciding rental rates have not kept up the same pace.

CHARLESTON CONTINUES TO ATTRACT & EXPAND COMPANIES

• Recent announcements provided by Charleston Regional Development Alliance and other economic development initiatives have shown the resilience of the Charleston market in attracting new companies.

• The Charleston region witnessed companies bringing new technology and initiatives, as well as firms moving to the area that specialize in providing capital and financing options.

Photo source: morrisonyardoffice.com

Photo source: themorrischarleston.com

Photo source: thequincharleston.com

Photo source: cbre.com