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Palmetto Center could remain vacant for years

SCANA employees Melba Hendricks, second from left, and Lisa Kelly, right, leave SCANA's headquarters in downtown Columbia as the workday winds down Wednesday.
SCANA employees Melba Hendricks, second from left, and Lisa Kelly, right, leave SCANA's headquarters in downtown Columbia as the workday winds down Wednesday. The State

Five months after SCANA left Main Street for new digs in Cayce, the prospects for filling the high-rise office tower, built for the utility 25 years ago, are not good.

The 20-story Palmetto Center could remain vacant for years, while sales agents and business recruiters try to find a company that will renovate and move into its 460,000 square feet.

"In the best of times, a facility like that takes a long time to market," said commercial real estate analyst David Lockwood, senior vice president for Colliers Keenan. "A typical vacancy could be multiyear."

But given the tough economy, "any business . . . is going to be very diligent and cautious. It is going to take longer to make decisions; negotiations are going to be longer."

In September, SCANA, the state's only Fortune 500 company, moved its 900 employees from the Palmetto Center and other Main Street buildings.

The move put a full one-tenth of downtown's 4.6 million square feet of commercial office space on the market.

That, coupled with the migration of firms from older downtown office towers to three new buildings on Main Street, caused the occupancy rate in the central business district to drop to 75.5 percent from a high of 91.1 percent in 2003.

But it was SCANA's move that put the big hurt on Main Street businesses, such as the Atlanta Bread Co. restaurant, which drew a large number of customers from the utility's employees.

Since the September move, business is down about 30 percent, manager Patel Kartik said. Before the SCANA move, the restaurant was serving 375 to 400 customers a day, he said. Now, it is lucky to hit 250 to 275.

Business has dropped off so much the store might close, Kartik said. "The owner is thinking about it," he said. "It's not going very well right now."

Palmetto Center leasing and sales agent Billy Way of Grubb & Ellis/Wilson Kibler said there is interest in the vacant space, but he termed it "exploratory."

"I've had a number of visits from purchase and lease prospects over the past couple of months," he said, "but nothing I can go into detail about."

The major challenges in marketing the building have been the weak economy and tight lending, he said.

Most real estate investors generally have a significant amount of debt, he said. But banks aren't loaning money for vacant buildings unless they are going to be owner-occupied or a significant amount of the space is pre-leased.

Because the Palmetto Center is 25 years old and was built specifically for SCANA, a new tenant will want significant, costly renovations.

Matt Kennell, president and CEO of City Center Partnership, which encourages and guides investment in Columbia's central business district, said the empty building could be a blessing.

"It's an opportunity to attract an out-of-state company and import jobs that don't exist in the market now," he said. "But that might take time."

The building's main selling point is the lower cost of operating a business in Columbia than in a larger city. Rents for top-of-the-line office space are one-third less in Columbia's central business district than in Charlotte, experts say.

Inadequate downtown parking also has been a challenge in marketing the building. The area needs 1,800 more parking spaces than it has, according to estimates.

Last May, negotiations with a potential Palmetto Center buyer failed because a parking agreement couldn't be reached.

The Palmetto Center, with its 900 SCANA employees, shared a 900-space parking deck with the Marriott Hotel, which controlled 300 of those spaces.

However, the city is building a new $8.5 million, 400-space garage at the northwest corner of Taylor and Sumter streets - a block from the Palmetto Center - that could help with future negotiations.

Columbia also has good quality of life factors compared with other cities, analyst Lockwood said, including a low crime rate, affordable housing and a university.

If a serious buyer comes knocking, Lockwood said, "I think the community and the city ... will make something happen."