The 10.6-million-square-foot Columbia general purpose, multi-tenant office market continues to go sideways. In the second quarter of 2012, according to Reis, the market saw 12,000 square feet of positive net absorption, but this barely exceeded the minus 10,000 square feet in the first quarter. The net for July and August combined was zero. The second quarter vacancy rate was 18.1%, down 10 basis points for the period but up 10 from a year earlier. The Class A and B/C rates were 14.5%, down 150 basis points over 12 months, and 21.1%, up 150. The overall rate was still 18.1% in August.
The vacancy rate would be higher if new supply had not virtually stopped after 2009, but Reis predicts it will resume with 62,000 square feet in 2012. The firm, however, predicts net absorption will turn positive from this point on, pushing the vacancy rate down to 17.5% at year-end 2012, 16.4% at year-end 2013, and 13.4% at year-end 2016.
Rents are expected to begin rising as well. The second quarter saw the average asking rent at $16.05 psf and the average effective rent at $12.45 psf, little changed from a quarter or a year earlier. There was no change in July or August. The second quarter Class A asking average was $18.18 psf, up 0.2% for the period, while the Class B/C asking average was unchanged at $14.26 psf. Even so, Reis predicts gains of around 1.0% for all of 2012, mostly toward the end of the year, around 2.0% in 2013, and 2.5% to 3.5%, roundly speaking, each year thereafter.
Colliers reports a direct vacancy rate of 23.3% and an asking rent of $15.03 psf for 10 million square feet in the Columbia area. “Although the vacancy rate seems very high, there are some properties with significant vacancy which inflate the vacancy rates,” and the Class A and B rates are just 12.8% and 18.0%.