The Greenville general purpose, multi-tenant office market is only improving slightly despite an absence of new supply. In the second quarter the vacancy rate for 8.8 million square feet of multi-tenant space fell 10 basis points to 19.8%. It was down 80 from a year earlier. The Class A rate fell 30 basis points during the period to 16.3%, and the Class B/C rate was unchanged at 23.0%. There was no additional decline in the still-high vacancy rate as of August. Net absorption, slightly below zero in 2011, was plus 62,000 square feet year-to-date in 2012 that month.
And now new supply, albeit in modest amounts, is set to return. Reis predicts the 125,000-square-foot phase one of Project One will complete construction by the end of the year, with the 200,000-square-foot second phase to follow. Reis, however, forecasts a pick-up in demand, with a near match between square footage added and absorbed during the rest of 2012 and a year-end vacancy rate of 19.6%. More rapid decreases are forecast to follow.
Rent growth remains limited. In the second quarter the average asking rent increased 0.1% to $16.51 psf with the average effective rent up 0.2% to $12.69 psf. There was little increase year-to-date, however, given first quarter losses, and no additional changes through August. Reis, however, predicts rents will ultimately rise by around 1.0% in 2012, with better gains eventually reaching 2.5% to 4.0% range to follow. The second quarter Class A and B/C asking averages, meanwhile, were $19.43 psf and $13.89 psf.
“We continue to see activity increase, particularly in the suburb areas of Greenville,” Lee & Associates reported. “Forty percent of the Top 40 deals this year have been in the Pelham Rd./Haywood Rd. corridor. We suspect this is a result of the attractive rental rates and inventory of quality, Class A space.”