Steve Canty is a senior vice president at GRS Group. He can be reached at (858) 433-0441 or via email at email@example.com.
The Charlotte area is increasingly standing out from other cities in the national commercial real estate office sector, due to a construction boom over the last five years that hasn’t let up.
Total office inventory in the market now stands at 70.8 million square feet, up more than 5.1 million square feet since 2014’s second quarter, according to Newmark Knight Frank’s second-quarter national office report. Even more impressive is the strong tenant demand, leading to a rent hike of 34 percent in five years, reaching $27.66 per square foot. Over the past 36 quarters, absorption has been positive for 35 of them, and leasing surpassed 100,000 square feet in all but two of those quarters.
Charlotte has always been a very strong banking center, and that has accelerated. A 33-story Bank of America tower is going up as part of the Legacy Union mixed-use development, in the Uptown neighborhood. Another development in that industry is the Ally Charlotte Center, another mixed-use center that includes a 26-story tower and will be anchored by Ally Financial.
However, there are other businesses building up a large Charlotte presence. Lowe’s is building a 357,000-square-foot tech hub in the city. Dole Food Company is opening a major office in the city as well.
In total, there is about 1.6 million square feet under construction.
So much new product is bound to lead to an increase in vacancy rates, but so far the impact on Charlotte hasn’t been that significant. Vacancy during the second quarter stood at 12.2 percent, down from 13.8 percent during the same year-ago period, according to a Cushman & Wakefield report (download here). And vacancy is expected by the firm to increase further, even with 444,000 square feet of new space set for completion by the end of 2019. After all, there had already been 2.1 million square feet absorbed half-way through the year, beating the most it has ever experienced in a full 12-month period.
The CBD and Uptown areas are seeing the most tenant demand, with a vacancy rate at 9.8 percent. That could possibly rise a bit, though, with several new spec developments in the works in both areas.
What all of this translates to is a busy transaction market in the making. Says Cushman: “As space is leased and rental rates continue to rise, owners are expected to sell properties for record high amounts as Charlotte demonstrates it is a viable and highly sought after investment market.”
About GRS Group
GRS Group is a leading provider of commercial real estate (“CRE”) services worldwide. With offices across the United States, Europe, and affiliates around the globe, GRS Group provides local market knowledge with a global perspective for institutional real estate investors, occupiers and lenders worldwide. The GRS Group team has evaluated and advised on over $1 trillion in CRE transactions.
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