SOUTHEAST SNAPSHOT, OCTOBER 2006

Charlotte, North Carolina Office Market

Charlotte’s central business district (CBD) is one of the tightest in the nation and becoming tighter. The city is getting its first taste of transit-oriented development (TOD) along arterials like South Boulevard (SouthEnd) and North Davidson (NoDa) leading from the downtown area. Also, South Carolina state and local tax incentives are luring many companies to York and Lancaster counties in South Carolina, which are 10 to 20 miles from downtown Charlotte and offer a great quality of life and superb public schools, not to mention economic savings for corporate America. Lauth Properties and Childress Klein will continue with their “just south of the border” Class A offerings in Edgewater and Kingsley Park, respectively. Merrifield Partners has also been an active  and successful player in South Carolina market offerings.

Pope and Land Company will soon begin the redevelopment of the 154-acre Charlotte Coliseum site, which was purchased for $23.3 million from the city of Charlotte early this year.  This new mixed-use development named City Park, will redefine what an infill development is in Charlotte. City Park will also offer the leading edge for an active lifestyle, environmentally conscious, residential/commercial offering that hopefully will be the Southeast’s new gold standard for private-public redevelopment.

Speaking of mixed-use projects, Piedmont Town Center in SouthPark is one of the premier mixed-use developments in the nation. Developed by Lincoln Harris and Crescent Resources, the office, retail and residential project is capitalizing on the momentum of South Park Mall, which houses Nordstrom and will house Neiman Marcus. Another mixed-use development is Pappas Properties’ and Collett & Associates’ Metropolitan, which will be a $200 million, 26-acre, Class A redevelopment of the former Midtown Square Mall property. This project will tie into the Little Sugar Creek Greenway and offer skyline views of uptown Charlotte.

Although substantial development is happening just across the South Carolina border because of that state’s tax incentives as well as quality of life, Charlotte’s submarkets within North Carolina are seeing activity as well. Whitehall, Ballantyne, and I-77 North  are witnessing development activity due to their access to I-485 and proximity to major interstate highways.  Infill mixed-use development is rising up along the new light rail line from Charlotte’s CBD to Pineville as well. And Charlotte has also seen suburban office growth into Concord via I-85.

With all of this new development, Charlotte has attracted new developers to the scene. Koll, Lauth and Pope and Land Company are the new big players, while many smaller boutique developers are also getting into the action with infill projects. While Bank of America and Wachovia continue to use a great deal of office space in Charlotte, the new office space in the city has a great diversification of tenants. Some of the major leases announced recently in Charlotte include HSBC signing on for 182,000 square feet at Kingsley Village; Bank of America renewing 640,000 square feet in uptown’s Bank of America Plaza; and Mergent signing on for 58,000 square feet at Kingsley Village.

Currently, Charlotte’s CBD Class A rental rates are $23 to $26 per square foot, while the suburban Class A rental rates range from $17.50 to $25.50 per square foot depending on the submarket. Meanwhile, Class A vacancy rates in the CBD are at 4 percent and dropping, while Class A vacancy rates in the suburbs range from 10 percent in Midtown to 30 percent in the Southwest submarket.

Looking to the future, Charlotte’s submarkets on I-77 North to Statesville should see strong development activity capitalizing on the new Lowes headquarters development. The submarkets along I-77 South to Fort Mill and Highway 521 South into South Carolina will also see good development activity. The transit-oriented development (TOD) along the light rail line from the CBD to Pineville is set for development as well as American Asset Corporation’s Bryton, a 500-acre, mixed-use project located on the transit line, off exit 18 in Huntersville, will break ground late this year.

And of course, the uptown is going to be exciting to watch as mid-rise and high-rise residential projects redefine Charlotte’s skyline. Overall, mixed-use, TOD and an urgency to embrace green and clean LEED (Leadership in Energy and Environmental Design) buildings are major development themes for the Charlotte region. Conservation in real estate will no longer be an individual virtue, but a leading economic, strategic and marketing driver. Companies like Duke Power, Bank of America, Wachovia, Koll, Lauth, Pope and Land, and Childress Klein are leading the environmental charge in Charlotte.

— D. Maxwell Hanks, CCIM, SIOR, is senior vice president and principal for Colliers Pinkard in Charlotte, North Carolina.

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