The Greenville-Spartanburg market for office space finds itself at the close of 2023’s second quarter in the peculiar position of having strong demand for product but facing a financial sector increasingly reluctant to underwrite debt for new construction or renovation projects to meet that demand.
The office market is also still being disrupted by shifting demands for office space for companies adapting to the rise of remote work coming out of the pandemic, according to Ned Reynolds, vice president for office sales and leasing services with Avison Young’s Greenville office.
Given the liquidity shortages rippling through the banking sector following the collapse of Silicon Valley Bank earlier this year, the uncertainty over whether there will be demand for new office projects is making banks reluctant to issue debt for such projects, Reynolds says.
“(Banks are) filtering everything through ‘Is this remote-work proof,’” he says.
John Montgomery, managing director for Colliers in Spartanburg, is even more blunt.
“I think it’s impossible to develop a (speculative) office (building),” he says. “It’s really put a chokehold on the market as far as development and sales.”
Montgomery and Reynolds say demand is still strong for office space in the Upstate, in part due to the ongoing influx of people and companies to the area. The fact the area never had a huge surplus of supply either going into or coming out of the pandemic also helps explain why demand for office space is stronger than it’s been in years.
“It’s not like we have brand-new office towers sitting empty,” Reynolds says.
Both men say even though the local market is strong, broader national trends will likely suppress office projects for the remainder of the year.
