CHARLESTON, W.Va. - The demand for space in Charleston's premier downtown office towers continues to strengthen, leading one commercial real estate broker to expect there will be some new construction.
The city's five "Class A" office towers, representing the best space available, have a current overall occupancy rate of 94.7 percent, according to a Jan. 1 survey conducted by broker Howard Swint.
To put it another way, Charleston's finest office buildings - Chase Tower, BB&T Square, United Center, Huntington Square and Laidley Tower - have a combined vacancy rate of just 5.3 percent.
"We are at what we call in the industry, 'effective full occupancy,' in Class A space," Swint said. "We consider it 'effective full occupancy' because buildings often have small pockets of space available on individual floors. That's what's reflected in these small, single-digit percentages. In fact, we expect new construction as a result of market conditions."
"No one builds 'Class B' space to bring onto the market," Swint said. "It's always 'Class A' by virtue of the construction materials and newness. When you're at 'effective full occupancy,' the tendency is to find an anchor tenant and let them be the new tenant in a new building. We think that is going to happen."
There has been one hint that new office construction is planned. Earlier this month it was reported that Lewis Payne of Kanawha Land Co. and Nelle Chilton of Dickinson Properties said plans for the vacant site at the confluence of the Elk and Kanawha rivers now includes an office building in addition to a Marriott Courtyard hotel.
The increasing occupancy rate for Class A space is being accompanied by higher prices.
Swint said, "For the first time in several years, we're finding that the average lease rate for Class A properties is increasing marginally. From a landlord's or building owner's perspective, that's a good sign because it indicates stability in the market and may signal a spillover into 'Class B' space."
According to Swint's most recent survey, which was compiled on Jan. 1, lease rates for Class A space range from $22 per square foot of rentable space in Chase Tower and United Center to $18.25 in Huntington Square.
The average rate for the five towers is $20.55. That's up from the $19.65 average recorded in August.
Chase Tower made headlines in September when The Nightingale Group, a New York-based investment firm, bought it from Brookfield Real Estate Opportunity Fund of Toronto, Ontario, Canada, for $21.5 million.
The tower had a 9.2 percent vacancy rate and a lease rate of $19.50 when it changed hands, according to a Swint survey. His latest survey shows the vacancy rate is down to 6 percent and the lease rate has increased to $22.