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SOUTHEAST SNAPSHOT, MARCH 2009
Charlotte Office Market
Howard Bissell of The Bissell Cos. sums his take on the Charlotte office market by echoing a concern voiced by developers all across the country. In nearly every major market and in a vast array of property types, developers are hurting because of rampant economic uncertainty. Tenants and investors simply don’t know what’s next, so they aren’t making any moves. “There’s a lot of concern over the unknown,” Bissell says. “Depending on where you are in the Charlotte market, you can point to slow downs in the velocity of leasing. What we started seeing last year has just accelerated into 2009.”
For developers like Bissell, the main concern in Charlotte isn’t that the office market has slowed, but that it’s taken a rapid course downward, a quick pace that nobody quite anticipated. Tenants are on the sidelines looking in. Bissell has had to put two of his developments on hold due to the recession. “We’re out there trying to capture every deal that we can, so long as it makes sense,” he says, noting that he foresees pursuing deals more aggressively in the next year.
At the Charlotte Chamber of Commerce, Jeff Edge takes a brighter point of view toward the Charlotte market. “Most people would say the market is fairly healthy. We still have a very low vacancy rate in downtown, and the suburban market really didn’t get overbuilt while the economy was booming. While we have space available, it’s a healthy amount of space that’s out there,” he says. Edge is also optimistic when talking about Wachovia’s downfall and its affect on the market. Edge cites a downtown vacancy rate that has hovered around 2 percent and says that the space vacated will ultimately help the office market. “There’s been virtually nothing available downtown for years,” he says. “It’s a double-edged sword on that front. We certainly don’t want to loose any of their business, but understand they have decisions to make. That could throw a different wrinkle on things over the next 6 months to a year.”
One reason some office brokers in Charlotte feel relatively calm about the uncertainty surrounding Wachovia’s collapse is the historic self-control practiced by area developers. If Wachovia exits the market, vacancy rates will go up, of course, but the numbers shouldn’t reach the level some cities are experiencing. Developers haven’t overbuilt the office market, so the loss of Charlotte’s major office player won’t be devastating.
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Novare Group’s 440 South Church property in Charlotte.
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“Our developers are extremely conservative here,” Edge says. “It’s a fairly tight-knit, predominately locally based development community.” Developments in the works include Novare Group’s 440 South Church Street, which will deliver 365,000 square feet of office space in 2010; 1 Bank of America Center’s 750,000 square feet of office space; and the 390,000-square-foot NASCAR Plaza, which will deliver this year.
There is still no easy way to reassure tenants about the economy. One key ingredient on the path to recovery, Bissell says, is the federal government. “We need the government to stay on course,” he says. “When the government steps in with bailout plans, stimulus packages or a mix of the two, unemployment will fall and the markets can start regaining strength.” Until then, Bissell says, the office market is in for a rough time. “2009 is going to be a year that we want to get behind us as soon as possible,” he says. “[The market’s health] is a matter of how quickly in 2010 things start to stabilize.”
— Jon Ross
Wachovia’s Sale May Bring Financial Players to Market
With Wells Fargo’s acquisition of Wachovia last year, the Charlotte office market has the potential to change drastically. If Wells Fargo decides to move workers out of Charlotte, a vast amount of office space could suddenly be on the market.
“[Wachovia is] the primary occupant in at least three towers and probably has a little bit of space scattered in other buildings,” says Jeff Edge of the Charlotte Chamber of Commerce. Wachovia also occupies a 2 million-square-foot customer support center in the University Research Park. Add to this space a planned 48-story headquarters development slated for completion in 2010. “There are other companies around Charlotte that have some interest in that space. I wouldn’t be surprised to hear announcements fairly soon that significant chunks are going to be eaten up,” Edge says.
The vacant buildings, in theory, would be occupied by other users in the financial industry. Agencies currently based in large banking cities are thinking about moving to Charlotte to take advantage of the city’s financial workers, many of whom may soon find themselves out of a job. The relative cost of doing business in Charlotte versus other cities doesn’t hurt, either.
“Some of these financial services groups that are in more expensive places like New York or Chicago or Los Angeles start thinking about opportunities when something like this happens,” Edge says. While no deals have been put into motion quite yet, Kenny McDonald of the Charlotte Regional Partnership says there is interest among larger banks and financial institutions. If these deals pan out, there’s a possibility that much of what Wachovia leaves behind will be absorbed by firms moving in from out of town.
“We are seeing a reasonable amount of activity and inquiries about our workforce,” McDonald says. “Real estate is secondary at this point. There are a lot of people wanting to nail down our workforce.” |
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