Charleston-metro office market riding crest of strong economy, major manufacturers locating in the area

The fully leased Daniel Island Executive Center 1 at 125 Fairchild St. houses Benefitfocus’ Design and Engineering sector. Leroy Burnell/Staff 5/12/2015

The aircraft giant that opened a Lowcountry jet-making plant early this decade has such a broad impact on the area economy that people dub it the “Boeing effect.”

Now, economic watchers may need to include Daimler Vans, and soon enough, Volvo as well in describing wide-ranging jobs/financial “effects.”

A sign of big manufacturers’ economic presence can be seen in commercial brokerage NAI Avant’s first quarter report on the business of developing and finding places for headquarters and related commercial tenants.

“Charleston’s office market remained hot throughout the first quarter of 2015,” says Scott Peevy, broker, and Kaitlyn Mills, marketing coordinator and project manager, who both work for NAI Avant in Charleston. They teamed to compile the report on local office demand and growth through March.

One reason for the surging market, they believe, is the “Boeing effect,” which continues to have a huge impact in the region. That is, Boeing’s 787 Dreamliner assembly plant not only attracted thousands of jobs and multimillions of economic investment dollars right off, it continues to bolster the economy through expansion and scores of spin off positions.

They cite a similar story from this March, when Mercedes-Benz disclosed that it would build a $500 million Sprinter van manufacturing plant in Ladson. The company intends to break ground next year.

The new plant, to rise on 200 acres in Palmetto Commerce Park, is projected to create 1,300 jobs in the coming years, according NAI Avant.

Volvo wasn’t included in the commercial brokerage’s April 30 report since no decision had been made at that time on where it would build a U.S. auto facility. The carmaker this week publicly disclosed plans to construct a $500 million plant in Berkeley County.

According to Mills and Peevy, headlines indicate a “strong economic forecast” for Charleston moving forward.

“The storyline from 2014 continued into the New Year — the office market is ripe for new development as strong demand continues and existing product is leased,” the pair note.

Statistical indicators point to “steady demand and rising (office) rental rates.” The authors note that a “healthy economy and the steady stream of accolades validating Charleston’s reputation as a great place to visit, work and live continue to contribute to vibrant market conditions.”

The NAI Avant report offered a number of findings on the status of office lease prices and development:

- Supply “tightened” as occupying tenants outdid exiting businesses by 208,615 square feet in the first quarter. The absorption took place primarily in the most luxurious, “Class A” market but also vacant “Class B” space filling up in suburban North Charleston.

- Vacancy rates stayed low most everywhere, with a 6.6 percent market average. Mount Pleasant’s volume of empty space was a particularly trim 4 percent.

- Lease rates increased as expected. The average market rate rose 3.3 percent from fourth quarter 2014 to a yearly figure of $20.63 per square foot as of March. Top-of-the-line Class A rates topped $25 a square foot yearly, while Class B space averaged $18.25 a square foot for the year.

• The priciest office rents were in downtown Charleston and Mount Pleasant, averaging $28.33 a square foot yearly and $23.69 per square foot for the year respectively.

At the same time, two “notable” new buildings added 169,000 square feet to the market inventory, according to Peevy and Mills. They were Daniel Island Executive Center 1, which contributed 145,000 square feet; and 2575 Elms Center Road, which brought on 24,000 square feet.

Both properties are 100 percent occupied, NAI Avant notes.

“Even with an additional 300,000 square feet under construction and planned in the region, we expect to see sustained demand,” the report’s authors say.“The robust health of the local economy bodes well for the sustained growth of the Charleston office market, and we expect these trends to continue throughout the rest of the year,” they conclude.

NAI Avant, founded in 1966, is headquartered in Columbia with an office in Charleston. For more, visit www.naiavant.com or contact David Grubbs, managing principal of the Charleston office at 843-814-6111 or dgrubbs@naiavant.com.

Reach Jim Parker at 937-5542 or jparker@postandcourier.com.