Charleston office market fundamentals are strong relative to other major metros. But while leasing and sales in the office sector are stable, we have to keep a close eye on how the Charleston market will fare in uncertain economic times in 2023 and beyond.

• Overall office vacancy in the market still remains at 10% or below, which reflects a healthy office supply and demand balance. While many office tenants are downsizing and some office assets are headed for trouble, Class-A leasing in prime locations remains strong. Tenants are willing to pay more for amenities and a superior workplace for their employees. Larger markets across the country tell a different story (soaring vacancies and empty headquarter buildings). But our smaller average tenant size and location desirability has helped us outpace some of this downturn.
• Charleston continues to struggle with recruiting new large office users. Most of our large office employers are homegrown.
• There will be a large chunk of Class-A office space delivered to the market in 2023, but nothing significant in the pipeline beyond that. The lack of new construction will be good for the newly completed Class-A office buildings by limiting competition moving through 2023, but it is a bit worrisome because of the length of time it takes for large new office buildings to get designed, permitted and developed (4+ years). We should see a period of swift lease-up and then rents will tend to increase because of the lack of new supply soon after that.
• Rising interest rates will continue to impact the sales sector by limiting the availability of debt to buyers. But even with interest rates rising, there does not seem to be upward pressure on office cap rates in the Charleston market.