Another older uptown Charlotte office tower will see renovations, continuing trend
An older uptown office tower is set to receive some love and care with a planned renovation that could cost north of $15 million.
Highland Ventures is ready to transform 525 N. Tryon into a more desirable office space after purchasing the building in May for $24 million. The purchase was a significant markdown of the almost $100 million county appraisal value and the $60 million the previous owner paid for the site a decade ago.
The Tennessee-based real estate firm plans to follow the growing trend of transforming office towers into more than just cubicle space.
“The (27-year-old) building is not that old… But you know when a building is tired and the owner wasn’t putting money into it,” said Sam Stilp, president of real estate for Legacy Commercial Property, a subsidiary of Highland. “The building’s lacking basic amenities… and we see this as an opportunity to turn it around, make some improvements and satisfy our tenants.”
525 N. Tryon’s history and future
The 19-story, 425,300-square-foot was built in 1998 and was last owned by New York Life Real Estate Investors.
The firm purchased the property in 2014 and added some amenities in 2016, including a fitness center, the Charlotte Business Journal previously reported. At the time Bank of America was the building’s largest tenant.
It’s unclear when the bank moved out but Stilp said once that space was vacant, leasing and other renovations slowed down. The lack of momentum gave Highland an opportunity to purchase the site and make needed changes.
Detailed plans aren’t solidified and there’s no set budget. Stilp said the renovations may cost north of $10 million to $15 million.
But one of the biggest improvements will be the 11th floor amenity deck, Stilp said. With the way the building is staggered, the 11th floor will become a rooftop terrace.
Spec suites will be added to the 11th floor and some of the conference rooms may be moved up, making it a showcase area for the building, Stilp said.
While the rooftop terrace is first on the improvement list, Stilp said Highland is also thinking about what will come to the vacant first floor space. And those thoughts are centering around food.
“There’s no food and that’s probably one of the biggest complaints,” Stilp said.
Right now, Highland has brought in food trucks to serve the need, Stilp said, but perhaps the first floor may include a breakfast or lunch eatery.
Other improvements include changes to the courtyard, lobby, bathrooms and elevator banks.
Charlotte’s office vacancies
All of the changes are geared toward enticing tenants to lease the more than 225,000 square feet of empty space in the building.
The tower is 46% occupied, which is on par for older buildings.
Charlotte’s vacancy rate is sitting at 22.4%, according to an April report from commercial real estate firm JLL. About 82% of that vacant space is in buildings built before 2015, the report said.
Charlotte’s vacancy rate is higher than the national average, which has hovered around 19% in the last few months, according to real estate research firm Yardi Matrix.
But Stilp isn’t worried about filling the space, mainly for the same reasons other experts aren’t worried about the overall vacancy rates.
“Charlotte is one of those cities everyone wants to have a foothold in,” Stilp said. “Banking is big in Charlotte and that attracts a lot of ancillary businesses like law firms and investment firms. We think a city like Charlotte probably has a higher percentage of workers returning to the office… and we think that there’s going to be continued job growth in the region.”
His assessments are pretty accurate.
According to a Yardi’s June National Office Report, Charlotte leads the 25 largest office markets in office job growth. That list includes cities such as Atlanta, Seattle and Austin, Texas.
As of April, Charlotte saw a 3.2% year-over-year increase in office employment, “more than double that of any other top market,” the report said. It’s also a “hot spot for corporate relocations.”
Some recent moves include Daimler Truck Financial Services USA, which announced plans in May to consolidate its offices into one headquarter space in Ballantyne.
Stilp also mentioned that office space construction is slowing in Charlotte, giving Highland even more opportunity to find tenants. The city is seeing a 12-year historic low in office space construction, with only one office building set to open this year.
Again, coupled with the renovation changes Highland plans to make, Stilp is hoping for a smooth leasing increase.
“We prefer to invest in a city like Charlotte that’s growing,” Stilp said. “We think there’s going to be continued growth downtown… and we’re excited for the turnaround opportunity.”
