CHARLESTON, W.Va. — Class A building vacancy rates in Charleston have sharply increased in the past four months, despite the expectation that rates would continue to recover from the 2014 exodus of energy companies.
According to the most recent office tower survey conducted by WV-Commercial associate broker Howard Swint, the average vacancy rate has increased from 14 percent to 17.8 percent in five of six Class A properties in downtown Charleston.
It’s the highest average vacancy rate ever recorded in Swint’s survey, yet there isn’t a clear cut reason as to why it increased, Swint said.
“It’s remarkable to me that it spiked the way it did in such a short period of time,” he said.
Class A properties are typically modern, high-rise office buildings with above-average rent costs for the area. The properties surveyed were: Chase Tower, Laidley Tower, the United Center, BB&T Square, MVB Bank Building and Huntington Square.
The Class A market has been experiencing difficulties after a glut of natural gas companies left the area in 2014 and 2015, most to areas closer to the Marcellus Shale. Coal companies also downsized their leases or left the buildings entirely, like Patriot Coal did in September 2014.
The average vacancy rate had been dropping in recent years, going from 16.6 percent in August 2015 to 14 percent in June 2016. But the market has managed to find a new floor, Swint said.
“I had thought we should have leveled off, because over the last couple of years it had hit the bottom,” he said. “I don’t know of any major moves that would have caused this, I think it’s just a piecemeal reduction in space from tenants.”
Swint added that he didn’t know which tenants specifically have been downsizing.
Chase Tower experienced the highest vacancy rate increase since June from 10.6 percent to 17.8 percent. Laidley Tower, which was recently put out of receivership, had the second largest increase from 26.2 percent to 32 percent. The rest of the buildings experienced slight increases of around one to two percentage points, besides the state-owned MVB Bank Building.
The total amount of space available for lease in the buildings is 176,203 square feet, up from 139,327 square feet in June. The total lease rate has also bumped up slightly, from $19.29 per real square footage to $19.62 per real square footage.
Swint said he expects the lease rate to drop soon with demand continuing to reach new lows. Listings on LoopNet from the commercial real estate company CBRE, which manages both Chase Tower and BB&T Square, have BB&T’s lease rate per square foot at $19, a decrease from the $20 indicated by Swint’s survey. The other buildings have remained at their current prices.
“The bad news is that the vacancy rates still increasing,” he said. “The good news is lease rates may be dropping in the future.”
Swint said he isn’t sure whether or not vacancy rates in the Class A buildings will continue to increase.
“We’re testing where the floor is right now, because I thought we had leveled off at around 14 percent vacancy,” he said.
Reach Max Garland at [email protected], 304-348-4886 or follow @MaxGarlandTypes on Twitter.