On Monday, officials and developers gathered to do something Charlotte hasn’t seen since the recession: break ground on a new office tower uptown.
The new 25-story office building, to be called 300 South Tryon, will add a big chunk of prime office space to the center city. Boosters said uptown has lost out on corporate expansions and relocations because too few large blocks of contiguous space are available.
“It is going to drive growth by providing desperately needed prime office space,” said Michael Smith, CEO of Charlotte Center City Partners. Smith said the 630,000-square-foot tower will help attract more companies uptown and help remedy the perception among site selection consultants that uptown lacks enough office space for large clients.
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“With the gap (in construction) we had during the recession, we came off our rhythm,” Smith said.
The new building is expected to be finished in spring 2017. Babson Capital Management, which has about 170 employees in Charlotte, will be the tower’s anchor tenant, leasing about a third of the space. The project also includes a 208-room boutique hotel at Church and Third streets, attached to the office tower by a walkway, but executives have said they aren’t ready to disclose more details.
The last new uptown office towers opened in 2010, when the 48-story Duke Energy Center and 32-story 1 Bank of America Center were completed.
“The cranes are back,” said Gov. Pat McCrory, holding a golden shovel and turning over a scoop of dirt and asphalt in the parking lot at the corner of Third and South Tryon streets, next to Latta Arcade. The lot has most recently been used for parking, Panthers tailgates and soccer parties.
McCrory reflected on the recent history of South Tryon Street, recalling the city’s efforts to provide street life uptown during the 1994 NCAA Final Four hosted in Charlotte.
“We had to bring together ... some fake entertainment facilities,” McCrory recalled. The city opened a four-block entertainment zone along South Tryon called the Street of Champions, complete with temporary bars and restaurants.
“It was this block. That was vacant buildings,” McCrory said, gesturing down the street.
That’s not the case anymore, McCrory said. The surrounding area has been growing fast, with the Charlotte Knights BB&T Ballpark and Romare Bearden Park opening recently just to the west.
“300 South Tryon is a reflection of Charlotte’s continued dynamic growth,” said Tom Finke, chairman and CEO of Babson Capital. “We are excited to be breaking ground on Babson’s future home in Charlotte.”
Apartment projects have sprung up across uptown and in the surrounding neighborhoods, with more than 2,100 announced apartments set to open next year in uptown, South End and Dilworth.
Across uptown, the office vacancy rate in the third quarter was 11 percent, compared with a citywide vacancy rate of 14.4 percent, according to data from real estate tracking firm Karnes. Uptown’s office vacancy rate was the third-lowest in the city. Only the smaller Midtown and Cotswold office submarkets had lower rates.
Still, the current vacancy rate is significantly higher than the 2 percent uptown vacancy rate in 2008, before the recession hit its worst.
More space opening up
More office space is opening up elsewhere in uptown. AT&T said Monday that it plans to relocate its 400 employees from the AT&T Plaza Building at 300 South Brevard Street before the company’s lease runs out in September 2015.
The employees will move to two other AT&T buildings, at 4100 Southstream Boulevard and 2359 Perimeter Pointe Parkway. Both are off West Tyvola Road. That promises to open up another major block of uptown office space: Childress Klein is marketing 340,000 square feet for lease at 300 South Brevard.
Uptown added 6 million square feet of new office space between 2000 and 2010, Smith said. Since then, there hasn’t been any. The 300 South Tryon Street project, which is being developed by Spectrum Properties and built by general contractor Balfour Beatty Construction, and other proposed new office towers uptown would add almost 1.8 million square feet by the end of the decade.
The uptown office space-crunch has pushed rental rates higher. Uptown had the highest average rent for office space in the city during the third quarter, at $27.38 per square foot. That’s compared to a citywide average of $23.01 per square foot, according to Karnes.
Among the announced uptown office towers, 300 South Tryon is the only one with a confirmed anchor tenant so far.
Two others say they plan to go forward on a speculative basis. Portman Holdings is planning a 19-story office tower atop the Westin Hotel garage at 615 S. College St., to open in the fourth quarter 2016. And Crescent Communities is planning to build a 27-story mixed-use tower with offices, retail space and an adjacent hotel to open in 2017 at Tryon and Stonewall streets.
Just south of Interstate 277, Trinity Capital and Honey Enterprises have said they plan to wait for an anchor tenant before starting construction on a 14-story office tower at 1000 S. Tryon St.