Published Nov. 23, 2015
For the first time since 2004, large blocks of speculative office space are under construction in Columbia’s Central Business District, according to CBRE’s third quarter market report.
Some 195,000 square feet of space is currently under construction downtown, with 125,000 square feet of it listed as speculative, CBRE added.
“The new construction, combined with other recently vacated space will push availability rates higher,” CBRE said. “Despite the addition of new supply, asking lease rates continue to rise and concessions are diminishing and Columbia is proving to be a landlord’s market.”
Some of the space availability is the result of corporate real estate restructuring. For example, AFLAC consolidated its operations in downtown Columbia, making 30,000 square feet of office space on Devine Street available.
Also, the Bank of America operations center in the St. Andrews submarket has been vacated and is currently for sale.
Still, the Columbia office market is a landlord’s market, CBRE said. Landlords now require longer lease terms before funding tenant improvements and are not adjusting allowances in the face of rising construction costs, leaving tenants to shoulder some of the burden.
“In addition to landlords strong-arming tenants on tenant improvement packages, parking is another area where tenants are getting squeezed,” CBRE said. “As tenants get more efficient with their space, their parking requirements are increasing. In this market, landlords have been less aggressive in assisting tenants in solving their parking needs.”
Direct impact of October’s floods on the office market is expected to be minimal and limited to the timing of specific transactions in the fourth quarter, the commercial real estate agency added.