For years during and after the recession, nobody wanted to talk about building another office tower in uptown Charlotte.
Too risky, the developers said. Recession-scarred banks were barely lending money to build houses, much less to construct multimillion-dollar skyscrapers.
But today, multiple tower projects are battling for tenants. Spectrum Properties and Cornerstone Real Estate Advisers are perhaps the furthest along in the development pipeline. They’re slated to break ground in January for their 25-story office tower at 300 S. Tryon St., beside Latta Arcade.
Real estate insiders took particular note of the project because it already has an anchor tenant, Babson Capital Management, to occupy the biggest chunk of the building.
Now, developers of two other uptown office tower projects say they’re going to break ground next year, too – even though neither project has the financial security of having an anchor tenant in hand.
Crescent Communities says its 27-story Tryon Place mixed-use project will go forward at South Tryon and Stonewall streets next summer. And Portman Holdings, which owns the Westin hotel at College and Stonewall streets, says ground will be broken in June for its 19-story office tower atop the Westin’s parking deck.
(Trinity Capital Advisors, developer of 1000 S. Tryon, a 14-story office tower planned just outside of the Interstate 277 loop at Morehead and Tryon streets, has said it will wait for an anchor tenant before starting construction.)
I got a chance to sit down recently with Atlanta-based Portman’s CEO, Ambrish Baisiwala. He said his firm is “absolutely” going forward in June, with or without an anchor. He chuckled in acknowledging that, at the moment, there’s “lots of aggressive marketing” percolating as the rival projects compete for corporate tenants.
“I’m quite comfortable with it,” said Baisiwala, whose two decades in real estate includes work in the Middle East, India, Southeast Asia and Australia.
Talking to him and to Portman’s leasing director, Travis Garland, I got a sense of what the sales pitch sounds like. They touted their building’s two-story outdoor balconies, direct access to the Lynx light-rail trains and proximity to the meeting spaces and restaurants of the Westin. They noted the high visibility their tower can have from I-277, and said the building could be finished in the fourth quarter of 2016 – faster than the other two proposed towers within the 277 loop.
But when I later touched base with Brian Leary, head of Crescent’s mixed-use and commercial group, he said that while he respects Portman’s work, he sees Tryon Place’s main competition as the Spectrum tower and the as-yet undeveloped parking lot between St. Peter’s Catholic Church and the Harvey B. Gantt Center for African-American Arts+Culture.
Tryon Place has a larger floorplate than the Westin tower, he said. And the Crescent project comprises a full city block that will include a hotel, restaurants and public gathering spaces that will make it South Tryon’s answer to the EpiCentre entertainment complex.
He said Crescent has smaller tenants at the ready – “single and double-floor occupants” – but is prepared to start construction next summer with or without the anchor tenant. Charlotte’s adding jobs – 22,400 over the past year, state figures show – and companies will need more space.
“We’re bullish on Charlotte and on the location,” Leary said. “So we’re going forward.”
Why are office developers suddenly itching to build in uptown? Since the Portman guys aren’t from Charlotte, I figured I’d get the out-of-town investor’s perspective from them. They offered several points:
•Charlotte’s on the radar.
Baisiwala said the major national real estate investment players have exhausted the best deal opportunities in top-tier cities such as New York, and are looking at up-and-coming cities such as Charlotte. The well-respected Urban Land Institute’slatest survey
of real estate insiders from around the U.S. ranked the city No. 7 among the top markets to watch in 2015. (Houston was No. 1, Raleigh-Durham was No. 10.)
Baisiwala and Garland said Charlotte’s business community over a decade tends to absorb 280,000 new square feet of office space annually, not counting existing tenants moving or renewing leases.
But since no new office towers have begun construction uptown since the recession ended in 2009, they said, that suggests a backlog of unmet office space need. “The fact that there’s talk about new (office) supply now is good because from a market point of view, it’s good to have a choice of offerings,” Baisiwala said.
•Capital is flowing again.
You could first see that around Charlotte in the wave of new apartment complexes cropping up in areas such as South End. Now, the capital is spreading to office developers as well.
There was a time, Garland said, when “we couldn’t have gotten a construction loan without having a significant pre-lease (in hand first). That world has changed over the last 12 months.”
On top of all that, tightening vacancy rates have helped push asking prices for Charlotte office space to their highest level in more than a decade, recent figures from real estate firm JLL show.
Add it all up, and you can see why the developers, who live and die by what the numbers say, like the direction Charlotte’s math is pointed in at the moment.
And why there’s likely the commercial leasing trade’s equivalent of hand-to-hand combat going on behind the scenes between the Portman and Crescent teams.
Even so, they all say there’s demand enough out there to fill all three tower projects.
Said Leary: “We think there’s room for all three (towers) to be successful in different ways.”
Eric Frazier writes about economic and real estate development, jobs and the economy. Got a story tip? Contact him at 704-358-5145, email@example.com or on Twitter at @Ericfraz.