Park Road and Cotswold, two south Charlotte areas with comparable amounts of office space, tell polar opposite stories about their vacancies, according to a report from a Charlotte-based market research firm.Park Road’s office vacancy rate has increased over the last several years. The study shows that area now has the highest office vacancy rate in the region – 32.67 percent. By contrast, Cotswold’s vacancy rate is the lowest in the region at 6.3 percent, according to the report done recently by Karnes, a real estate analysis firm. The two markets represent extremes in the Charlotte metropolitan area.Andrew Jenkins, managing partner for Karnes, said a healthy market will have a vacancy level of 10 percent or less. A healthy office space environment is important because such space usually generates jobs. Those jobs are often higher paying and more stable than those in the retail sector, Jenkins said.From 2009 to 2013, Park Road’s office vacancy rate increased 25.9 percent, from 188,817 square feet to 237,677 square feet, the study says. Cotswold’s vacancy rate decreased by 29 percent during that same time, from 19,726 square feet to 14,001 square feet. Jenkins said Park Road and Cotswold have several things in common.Both have mostly Class B and C office space, meaning the space is older and doesn’t have the amenities common in newer Class A office space. Class B office spaces usually have rents in the average range for the area. Building finishes are fair to good for the area and systems are adequate, according to the Karnes report.But they don’t compete with Class A at the same price, according to Karnes.Jenkins said the rates from Class B rents averaged $18.42 per square foot in Cotswold and $16.29 per square foot in Park Road during the second quarter of 2013.And since both areas are heavily residential with strong retail, there is less office space. Cotswold has 220,647 square feet and Park Road has 727,403 square feet, making the markets the smallest in the region, according to data from Karnes. Because of limited space, these two areas are not likely to attract a corporation that would create hundreds of jobs, such as the recent MetLife relocation to Ballantyne, according to Jenkins and representatives from the Charlotte Chamber of Commerce.In the last several years, Cotswold has continued to develop office space. One example is Providence Plaza, a newer 53,000-square-foot building at Sharon Amity and Providence roads that houses such companies as Choate Construction and Walker & Associates CPA PA.“You figure that’s about 25 percent of that market in that one building,” Jenkins said. “That building is pretty much fully leased, which is one of the reasons why (vacancy) rates are lower.”And in 2011, Sonic relocated its headquarters after purchasing and redeveloping the seven-story Cotswold Professional Center on Colwick Road in 2010.Meanwhile, Park Road’s market includes several older and larger office buildings with high vacancies, Jenkins said.Such buildings are harder to fill because the companies looking for large amounts of office space are probably seeking Class A office space in Ballantyne and uptown, said Jeff Edge, senior vice president of the Charlotte Chamber of Commerce.The Park Road area also has relied on nearby development to draw tenants that want to be close to Southpark but didn’t want to pay that area’s high prices. Southpark’s office development has stabilized in recent years, Jenkins said.“Ballantyne has become the shiny new penny,” said Edge. “So Southpark, the Coliseum, the airport area and their submarkets have maybe taken a little bit of a backseat because they haven’t had as much new construction.”Jenkins also said because Cotswold and Park Road are such small markets, they are particularly vulnerable to wide swings in vacancy space when even one tenant leaves. Jenkins said the high vacancy rate in Park Road also could deter companies that want to move in existing office space there because companies frequently want to locate where they have easy access to complementary businesses and clients.But Edge said Park Road and Cotswold can use their vacancy rates to their advantage.For tenants considering Class B or C office space in Park Road, it means they’ll have relatively low rates with a desirable location near Southpark. For landlords in Cotswold, it means they may be able to start raising their rates because of the high demand and low supply of available space.“It’s good for tenants on one end and landlords on the other,” he said.
Friday, Aug. 23, 2013
Office space cost varies widely in South Charlotte
Office space Here’s a look at available office space, listed in square feet, in some south Charlotte markets as compared with the rest of Charlotte: Total Charlotte Metro Market • Office space available: 50,128,666 • Office space vacant: 8,300,587 • Vacancy: 16.6 percent Cotswold • Office space available: 220,647 • Office space vacant: 14,001 • Vacancy: 6.3 percent Crownpoint/Matthews • Office space available: 1,105,898 • Office space vacant: 213,261 • Vacancy: 19.3 percent N.C. 51/Southeast • Office space available: 6,879,023 • Office space vacant: 1,599,786 • Vacancy: 23.3 percent’ Park Road • Office space available: 727,403 • Office space vacant: 237,677 • Vacancy: 32.7 percent Southpark • Office space available: 4,249,334 • Office space vacant: 452,440 • Vacancy: 10.6 percent
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