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Charleston Commercial Real Estate Outlook: Key Contacts

John Rector

Introduction

Charleston, SC’s commercial real estate (CRE) market has remained relatively resilient even as the broader U.S. market struggles with high vacancies and rising interest rates. Office and retail properties in Charleston are benefitting from strong population and job growth, helping the region outperform national trends (The Corner Office Market Report – Volume 1 – 2023 – Lee and Associates – Charleston, SC) (Charleston’s office market continues to outpace the national average). However, higher interest rates and looming loan maturities are creating pockets of financial distress, with some properties facing refinancing challenges or even foreclosure. This report examines foreclosure/bankruptcy trends, the 2025 loan maturity outlook, how Charleston compares to national CRE conditions, and where investment opportunities may arise from distressed office and retail assets. We also identify specific properties and financial institutions with exposure to these at-risk assets, and provide contacts for key local stakeholders.

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Charleston Commercial Real Estate Outlook Key ContactsDownload

Foreclosure and Bankruptcy Trends in Charleston CRE

Stability Amid National Turmoil: Nationwide, the office sector is under severe stress – U.S. office vacancies hit a record ~17.5% in early 2024 (How Union Pier could lure potential commercial investors to Charleston – Charleston Business), and office loan defaults climbed to ~$38 billion by April 2024 (the highest since 2012) (HOT TOPIC: Real Estate Roundup: Feeling the Impact of Higher Rates | , Charleston SC | Wells Fargo Advisors ) (HOT TOPIC: Real Estate Roundup: Feeling the Impact of Higher Rates | , Charleston SC | Wells Fargo Advisors ). Retail has also seen rising distress nationally (about $20.2 billion, second only to offices) (Distress in US Commercial Property Grew at a Slower Rate – MSCI). In contrast, Charleston’s office market has “shown remarkable resilience” through 2023-2024 (Charleston Office Market – Lee and Associates – Charleston, SC). Vacancy rates in Charleston have even declined in recent quarters – down to ~16.3% in Q1 2024 (How Union Pier could lure potential commercial investors to Charleston – Charleston Business), lower than the U.S. average – thanks to steady demand. Local experts note “Charleston looks just fine…we haven’t shifted to panic mode (yet)” (The Corner Office Market Report – Volume 1 – 2023 – Lee and Associates – Charleston, SC). This suggests no wave of CRE foreclosures has hit Charleston to date, unlike in larger metros.

Emerging Distress Signs: That said, higher interest rates and post-pandemic shifts are impacting Charleston. A few properties have begun to trade as distressed assets (e.g. one report noted 8 office buildings sold in Q2 2024 including 3 distressed properties – an early sign of strain) ([PDF] Q2 2024 MARKET REPORTS | Lee & Associates). Thus far these appear to be isolated cases, not a market-wide crash. No major CRE bankruptcies in Charleston have been reported recently, aside from national retail chains’ closures (e.g. Bed Bath & Beyond, Party City) that left some local store vacancies (Retailers, chains that announced closures in 2024 – WCBD). Historical context shows that Charleston is not immune: for example, the 1.1 million sq. ft. Citadel Mall went into foreclosure in 2013 after its owner defaulted (Citadel Mall – Wikipedia). It was auctioned to the lender and later resold, illustrating how distress can create turn-around opportunities (the mall is now being repositioned as a mixed-use “Epic Center”). Today’s environment, while not as dire, bears watching as rising rates continue to pressure owners.

Key Takeaway: Charleston’s CRE sector has avoided the worst of the foreclosure uptick seen nationally (The Corner Office Market Report – Volume 1 – 2023 – Lee and Associates – Charleston, SC). There is no rampant bankruptcy wave in the local office/retail market, thanks to Charleston’s strong fundamentals. However, investors should monitor individual troubled assets – some distressed sales are occurring, potentially offering discounted entry points.

Loan Maturities and Refinancing Risks (2025 Outlook)

Maturity Wall Approaching: A massive amount of commercial mortgages come due in the next 1-2 years nationwide – roughly $1.2 trillion in 2024-2025 (HOT TOPIC: Real Estate Roundup: Feeling the Impact of Higher Rates | , Charleston SC | Wells Fargo Advisors ). Many of these loans were originated at low interest rates and now face refinancing at much higher rates (current commercial mortgage rates ~6–7% vs. ~3–4% on old loans (Looking at Commercial Real Estate in 2025 – Terrydale Capital)). This interest rate shock is expected to make 10–15% of maturing CRE loans “too hard to refinance” without additional equity or restructuring (15% of Maturing CRE Loans Too Hard to Refinance). Office and retail properties are most at risk due to fallen values and higher vacancy (15% of Maturing CRE Loans Too Hard to Refinance).

Charleston’s Loan Maturities: Charleston is not immune to this refinancing challenge. In 2024 alone, about $274.5 million in Charleston CRE loans were set to mature, and $735.6 million will mature over the 2024–2028 period (How are CRE loan maturities changing over the next five years in Charleston?). The good news is much of Charleston’s 2024 maturities were industrial loans (82%) and only ~7% office (How are CRE loan maturities changing over the next five years in Charleston?). The office sector’s share of upcoming maturities is relatively modest (about 27% of Charleston’s five-year total) (How are CRE loan maturities changing over the next five years in Charleston?). This favorable loan mix means Charleston’s office market isn’t as burdened by near-term debt expirations as harder-hit cities. For 2025 specifically, a “significant influx” of CRE debt will continue to come due (How are CRE loan maturities changing over the next five years in Charleston?) – likely on the order of $200+ million (if spread evenly over the five-year total). Some notable local 2025 maturities may include office mortgages originated during the low-rate era that now face higher refinancing costs and stricter underwriting.

Refinancing Challenges: High interest rates are the critical issue. The Federal Reserve’s rapid rate hikes (10 consecutive raises in 2022–2023) have pushed benchmark rates to ~20-year highs (The Corner Office Market Report – Volume 1 – 2023 – Lee and Associates – Charleston, SC). Owners looking to refinance in 2025 may see mortgage rates near 6% (or more) versus sub-4% on their old loans (Looking at Commercial Real Estate in 2025 – Terrydale Capital) (HOT TOPIC: Real Estate Roundup: Feeling the Impact of Higher Rates | , Charleston SC | Wells Fargo Advisors ). Combined with lower appraised values (U.S. CRE prices fell ~11% from Mar 2022 to Jan 2024) (HOT TOPIC: Real Estate Roundup: Feeling the Impact of Higher Rates | , Charleston SC | Wells Fargo Advisors ), this creates a refinancing gap – some properties won’t qualify for the same loan amount, leading to potential cash shortfalls or defaults. In Charleston, leasing fundamentals are better than average, which helps support valuations, but lenders are still cautious. As one local broker noted, the “high interest rate environment” is making it “a challenge to find buyers” or new loans for even well-occupied office buildings (How Union Pier could lure potential commercial investors to Charleston – Charleston Business) (How Union Pier could lure potential commercial investors to Charleston – Charleston Business). Lenders are demanding more equity or other uses to bolster income. For example, at 525 East Bay Street (a downtown Charleston office building), the owners are exploring adding apartments or a drive-through bank branch to increase revenue and attract financing (How Union Pier could lure potential commercial investors to Charleston – Charleston Business) (How Union Pier could lure potential commercial investors to Charleston – Charleston Business).

Key Takeaway: Many Charleston CRE loans maturing in 2025 will face refinancing at double the previous interest rate, squeezing cash flows. Charleston’s strong market has kept property values relatively firm, but debt coverage will still tighten. Investors should anticipate potential loan workouts, extensions, or owners seeking capital partners. This climate may force motivated sales of assets by owners who can’t refinance – opening doors for buyers with access to cash or creative financing. (HOT TOPIC: Real Estate Roundup: Feeling the Impact of Higher Rates | , Charleston SC | Wells Fargo Advisors ) (How Union Pier could lure potential commercial investors to Charleston – Charleston Business)

Charleston vs. National Trends: Outperformance or Parallel Decline?

Office Sector: Relative to major U.S. cities, Charleston’s office market is outperforming. Since 2020, the national office vacancy rate has jumped about 7.7 percentage points (reflecting huge space give-backs), whereas Charleston’s office vacancy rose only ~0.5% in that time (Charleston’s office market continues to outpace the national average). As of early 2024, Charleston’s office vacancy was ~15%, about 4.9% lower than the U.S. average (which was near 20%) (Charleston’s office market continues to outpace the national average) (How Union Pier could lure potential commercial investors to Charleston – Charleston Business). Local demand has been bolstered by in-migration and companies drawn to the area’s lifestyle and business climate (Charleston’s office market continues to outpace the national average). In fact, Charleston continues to attract firms seeking smaller, flexible offices to serve a growing regional population (Charleston Office Market – Lee and Associates – Charleston, SC). New construction is limited, so supply is not overshooting demand (Charleston Office Market – Lee and Associates – Charleston, SC). These factors helped Charleston “buck the trend” of rising vacancies – one quarter saw a decrease in local office vacancy even as most markets worsened (How Union Pier could lure potential commercial investors to Charleston – Charleston Business). Rent growth has been modest but positive (Charleston office asking rents ~$32–$36/SF, still edging up) (CHARLESTON MARKET – SVN Blackstream).

By contrast, many big cities are struggling with hybrid work and empty towers. Markets like San Francisco, NYC, and Chicago have seen office values plunge 30–40%, whereas Charleston’s values have held steadier (The Corner Office Market Report – Volume 1 – 2023 – Lee and Associates – Charleston, SC) (The Corner Office Market Report – Volume 1 – 2023 – Lee and Associates – Charleston, SC). Charleston’s advantage: a tertiary market with unwavering population growth (over 2× the U.S. average) driving space demand (The Corner Office Market Report – Volume 1 – 2023 – Lee and Associates – Charleston, SC). That said, Charleston is not entirely detached from macro forces – sublease space and cautious corporate expansions have kept its Class B offices somewhat soft. Overall, though, Charleston’s office market is faring better than the nation’s – a “shining example of resilience” amid a troubled sector (The Corner Office Market Report – Volume 1 – 2023 – Lee and Associates – Charleston, SC).

Retail Sector: Nationally, retail real estate has been recovering from the e-commerce shakeout, and Charleston’s retail market is particularly robust. The metro’s retail vacancy was just 4.3% in Q4 2023 (CHARLESTON MARKET – SVN Blackstream), well below the national retail vacancy (which hovers ~6-7% in many areas). Charleston’s strong population and tourism growth underpins healthy retail sales. Grocery-anchored centers and “experiential” retail (restaurants, entertainment) are thriving and attracting investors (CHARLESTON MARKET – SVN Blackstream). In fact, Charleston retail rents have been rising, averaging ~$22–28/SF (NNN) depending on format (CHARLESTON MARKET – SVN Blackstream). This outpaces many markets where retail rents are flat. Big-box vacancies have inched up locally with a few chain store closures (CHARLESTON MARKET – SVN Blackstream), but those spaces often get backfilled due to demand from discount retailers or adaptive re-use. For example, former big boxes are sometimes repurposed as fitness centers, medical offices, or even indoor self-storage in high-demand submarkets.

Capital Markets and Investment Trends: Nationally, CRE investment volume fell in 2023-2024 as investors grew cautious of higher rates and declining property values (HOT TOPIC: Real Estate Roundup: Feeling the Impact of Higher Rates | , Charleston SC | Wells Fargo Advisors ). Charleston, however, continued to see active investment interest. The region’s transaction activity has included out-of-state buyers targeting Charleston’s relatively stable office assets (which offer yields without the deep distress of larger cities). A report from late 2024 noted Charleston’s CRE market was “on fire” with investors due to the region’s economic boom, keeping office vacancy around 7–10% (depending on data source) and five straight years below 10% (Charleston’s commercial real estate market is ‘on fire’ and boom …). While that 7% figure may refer to select submarkets (Peninsula downtown vacancy was ~7.8% in Q4 2023) (CHARLESTON MARKET – SVN Blackstream), it underscores that Charleston is outperforming many markets where office vacancies are double that.

In summary, Charleston is weathering the broader CRE downturn better than most. It is not declining in lockstep with harder-hit metros – vacancies are lower, rent growth is positive, and distress is contained (The Corner Office Market Report – Volume 1 – 2023 – Lee and Associates – Charleston, SC) (Charleston’s office market continues to outpace the national average). This relative strength gives Charleston an aura of a safer harbor for investors.

Key Takeaway: Charleston’s CRE fundamentals – especially in office and retail – are stronger than the U.S. average, thanks to steady population and job growth. The market is outperforming, with lower vacancy and sustained demand (Charleston’s office market continues to outpace the national average) (CHARLESTON MARKET – SVN Blackstream). Investors should still be cautious (interest rates affect everyone), but Charleston’s assets may hold value better and recover faster. In other words, Charleston is riding the national wave, not sinking under it.

Opportunities in Distressed Office & Retail Assets

The current landscape is creating rare opportunities for investors to acquire quality Charleston properties at potentially bargain prices – particularly in the office sector. As some owners face loan difficulties or need to sell under duress, distressed assets can be picked up well below replacement cost. For instance, across the U.S., recent distressed office sales have averaged just $74 per square foot, versus ~$162/SF market pricing for non-distressed deals (The Corner Office Market Report – Volume 1 – 2023 – Lee and Associates – Charleston, SC). Even if Charleston’s discounts aren’t that steep, any increase in local distress could let savvy buyers purchase offices for pennies on the dollar. Early signs already show a few high-vacancy or outdated offices trading at marked-down values in Charleston ([PDF] Q2 2024 MARKET REPORTS | Lee & Associates). Investors with patience and renovation capital could reposition these buildings (e.g. update amenities to lure tenants, or convert to alternate uses). One opportunity trend is adaptive reuse of underperforming offices – adding residential or mixed-use components. The 525 East Bay St. office building example is instructive: feasibility studies showed 18 apartment units could be added on site, which would create a new income stream and enhance the property’s value (How Union Pier could lure potential commercial investors to Charleston – Charleston Business). Incorporating such mixed-use elements can not only improve cash flow but also make properties more attractive to lenders and future buyers.

In retail, undervalued assets exist in the form of older shopping centers and mall properties that haven’t kept up with Charleston’s growth. An investor might target a struggling neighborhood retail center with higher vacancy – by bringing in new tenants (for example, local service businesses or popular restaurant concepts) and modernizing the space, the center’s NOI can be boosted significantly. Charleston’s booming residential development (new housing communities in suburbs like West Ashley, Summerville, etc.) creates demand for retail in those corridors. Distressed retail properties in growing areas may be undervalued relative to their potential. For example, a tired strip center with big-box vacancies can be bought cheap, then repositioned by splitting a box into smaller stores or entertainment venues. With Charleston’s retail vacancy only ~4%, any well-located property has a good chance to rebound with the right strategy (CHARLESTON MARKET – SVN Blackstream). We also see potential in anchor replacements – e.g. if a mall lost a department store, an investor could redevelop that wing into mixed-use (such as adding multifamily or a medical office). Charleston’s zoning and community support are increasingly favorable to creative reuse, given the priority to prevent blight.

Emerging Investor Interest: Opportunity funds and real estate private equity are actively scouting secondary markets like Charleston for distressed deals, as prices in gateway cities remain high risk. Charleston’s mix of stability and upside is appealing. Local investment firms (e.g. Ziff Real Estate Partners in Mt. Pleasant) that specialize in value-add retail are likely eyeing any underperforming centers for acquisition (Contact Us – Ziff Real Estate Partners). Similarly, regional players like RealOp Investments (a Greenville-based firm focusing on opportunistic acquisitions across the Southeast) have a presence in Charleston (RealOp Investments) and could snap up office buildings that larger investors overlook. With fewer distressed assets available in Charleston than in big cities, competition among buyers may actually keep prices from falling too far – but those who act quickly on the first wave of distress could lock in the best deals.

Target Assets to Watch: Class B and C office buildings are the primary distressed targets. Many Class B offices (older buildings with dated interiors or less prime location) are seeing tenants migrate to newer spaces, pushing their vacancy up. Owners of such buildings with loans maturing may prefer to sell at a discount rather than refinance with more cash. Examples might include suburban office parks in North Charleston or older mid-rise offices in West Ashley and Mount Pleasant that have lost major tenants. On the retail side, watch for centers impacted by retailer bankruptcies – for instance, if a national chain closure leaves a 20,000 SF hole in a shopping center, that center’s financials could falter and present a chance to buy low. Historically, Charleston’s largest distressed asset was Citadel Mall, which traded for only $17 million after foreclosure (roughly $15/SF) (Citadel Mall in West Ashley sells for $17 million | AP News). That transaction, though a decade old, shows the scale of discount possible when a seller is distressed. While no current opportunity is that extreme, smaller-scale distressed sales (with, say, 20–40% discounts) may emerge in 2025.

Investor Strategy: To capitalize on these opportunities, investors should build relationships with local brokers and banks to hear about troubled assets before they hit the market. Due diligence is key – understand why an asset is distressed (Is it functional obsolescence? Mismanagement? Overleveraged capital stack?) and have a clear plan to fix it. Expect lenders to be conservative; cash offers or assumable debt deals will be attractive in this environment. Also consider partnering with local experts – Charleston-based developers or property managers can provide insight on repositioning assets to meet local demand (for example, converting an empty retail box into a trampoline park or grocer that the community needs). With Charleston’s economy still growing (employment surged in 2023-24 and unemployment is low), a distressed asset today could turn into a profitable trophy asset in a few years if acquired and managed astutely.

Key Takeaway: Distress in Charleston’s office/retail market, while limited, presents a window of opportunity for investors. Undervalued offices can be acquired at a fraction of replacement cost and repositioned or held for market recovery (The Corner Office Market Report – Volume 1 – 2023 – Lee and Associates – Charleston, SC). Retail centers with temporary struggles can be revitalized to ride Charleston’s strong consumer demand. The upside potential is significant – investors can lock in prime locations at reduced prices in a market that is expected to rebound faster than most. Careful asset selection and creative value-add strategies will be crucial to unlocking these opportunities.

Notable Distressed Assets and Exposures

Below are some specific properties and financial institutions in Charleston that are either showing signs of distress or have notable exposure to at-risk loans (as of late 2024/early 2025):

Key Takeaway: Investors should identify specific targets by name and watch their status – knowing which properties are on the cusp of distress is half the battle. Likewise, understanding which banks hold the paper can guide your strategy (for example, approaching a local bank’s special assets officer before a property ever lists). In Charleston, the list of distressed assets is relatively short, but that means each one is a prime opportunity if you can secure it.

Key Contacts and Stakeholders

For investors and stakeholders interested in Charleston’s commercial real estate (especially distressed opportunities), connecting with local experts is crucial. Below is a selection of relevant contacts (publicly available) in the Charleston market:

(All the above contacts are sourced from public directories or official websites. They provide a starting point for investors seeking on-the-ground information or partnership opportunities.) (Contact – Lee and Associates – Charleston, SC) (Colliers International | Charleston – The Broker List)

Conclusion and Investor Takeaways

Charleston’s commercial real estate outlook for 2025 remains fundamentally positive relative to the nation, but not without challenges. High interest rates and a wave of loan maturities will test some owners, likely leading to isolated defaults and distressed sales. For investors, the Charleston market offers a compelling mix of lower downside (thanks to economic growth and demand) and upside potential from any distress that does occur.

Key takeaways for investors and stakeholders:

In conclusion, Charleston, SC is navigating the commercial real estate downturn better than most markets. The office and retail sectors here are down but not out – in fact, they’re demonstrating strength in adversity. Distressed properties and loan defaults will likely remain targeted opportunities rather than a systemic issue. For investors with a strategic, opportunity-focused mindset, Charleston’s blend of stability and growth offers a fertile ground to seek out undervalued gems in 2025. By staying informed and connected locally, stakeholders can capitalize on those rare chances where a normally thriving market offers a distress-driven discount – turning challenges into profitable ventures.

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