As unique as Charlottesville is, it is not immune to the economic laws of supply and demand. The market for office space in Charlottesville is a great case in point.
Over the course of the past year, CBRE-Charlottesville has determined that the market for Class A office space has continued to strengthen due to sustained demand from growing businesses, combined with no new supply (i.e. no new construction of Class A space). Vacancy rates decreased to 4.0% in 2016 from 7.5% in 2015 while average asking rental rates subsequently climbed 4.6% over the same period to $24.84 per sq. ft.
Charlottesville has transitioned to a highly landlord favorable market as scarce available product has created significant upward pressure on rental rates. With Charlottesville’s robust and on-going employment growth, demand for Class A office space is expected to continue to grow for the foreseeable future.
Limited available product and rising rental rates in addition to the growing workforce has created an environment ripe for new development. Accordingly, Charlottesville’s office development pipeline should surge with multiple projects ready to accommodate strong demand within the Central Business District (CBD).
Charlottesville’s vacancy rate fell to 4.0% in 2016, its lowest level since CBRE began tracking the Charlottesville market 6 years ago. Leading the market with the lowest vacancy rate was the CBD with a vacancy rate of 0.8% in 2016, down from 3.5% in 2015. As this submarket has become increasingly tight there is consensus that development of Class A office space is now viable.