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The Cotswold area of southeast Charlotte is the city's smallest office market at just under 500,000 square feet.
But a Charlotte development venture believes the tight supply of space makes it ideal for a modern medical office building.
RED (Real Estate Development) Partners disclosed plans Wednesday for a two-story, 32,000-square-foot building on Colwick Road across from the Shun Lee Palace restaurant.
The Charlotte real estate firm is teaming with Eastern Federal Corp. to develop the estimated $8 million project.
The 1.7-acre site is occupied by the 32-unit Sharon Arms Apartments, which would be demolished to make way for the project when the developers secure enough tenants.
RED Partners' Judd McAdams said the developers would like to break ground early next year – if they can get commitments for at least 50 percent of the space.
The building, for lease or sale, has no signed occupants now. McAdams said the developers are buoyed by the initial interest they've receive after sharing their plans with potential office tenants.
Nevertheless, “getting enough pre-leasing in today's market might be difficult,” said real estate broker David Dorsch, who researches the market for Colliers Pinkard.
Charlotte commercial real estate sales and construction have been slowed by the recession. Mecklenburg County issued only 75 commercial building permits through April, 48 percent fewer than in the same four-month period last year.
McAdams said the developers are optimistic because of the consistent demand for office space in the Cotswold area and its proximity to hospitals, shopping centers and the center city.
The area is a plus, Dorsch said. “The residential demographics and the proximity of places like Myers Park and SouthPark are really what you are tapping into there,” he said.
The developers purchased the property last week.
If they can't make the project fly in this economy, McAdams said, they have a backup plan: improve the Sharon Arms Apartments and continuing operating the complex until conditions improve.
Construction of the contemporary-style office building, designed by Gresham, Smith and Partners, would take about a year. The developers are aiming for Leadership in Energy and Environmental Design (LEED) certification.
McAdams said they are working to sign a contractor and secure a lender.
Lease rates and sale prices are to be determined, he said. Colliers Pinkard's first quarter survey of the office market listed the average annual rental rate in Cotswold at $21.84 a square foot.
The property is zoned for offices, and the developers won't need a rezoning to proceed.
Last year, the City Council denied another developer's petition to rezone the site for 34,600 square feet of medical offices and 6,900 square feet of general office or neighborhood services.
