A pair of reports released this week from major brokerages highlighted the surge of new construction, rising rents and tight vacancy rates for office space across the Charlotte region. JLL noted that more than 2.3 million square feet of new office space is under construction – near the previous high in 2008 – and pre-leasing activity for new office space is brisk.
Asking rents for the new office space coming to market are in the mid- to high $30 per-square-foot range, a new high for Charlotte. And developers are willing to kick off new projects, indicating they think the good times are going to continue.
“A recurring theme in the market has been speculative projects kicking off quarter-over-quarter, along with the velocity at which they find pre-leased commitments,” JLL analysts wrote. “Even with asking rates reaching historic high-water marks, leasing activity remains high in urban and suburban submarkets.”
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New office space has been snapped up so far. Last week, Bank of America announced it had signed a lease for more than 500,000 square feet in the new, 33-story office tower under construction on the former Observer site. In Ballantyne, Wells Fargo leased the entire new, 287,500-square foot Brigham Building. And new office buildings such as 500 East Morehead and 615 South College, started without tenants, have been signing leases at a brisk clip as they near their opening dates.
The region’s total office vacancy rate dipped to 11.9 percent last year, JLL said, down from 17.8 percent in 2010. That was the height of the post-recession slump.
Charlotte is currently experiencing the strongest office market fundamentals on record since CBRE began tracking the market decades ago.
Patrick Gildea, CBRE
With the wave of new office buildings set to open this year, JLL expects the vacancy rate will tick up slightly, to 12.7 percent, before the space is leased and occupied.
And despite the splashy new office towers under construction uptown, a report from CBRE suggests that the suburban office market is still performing just as well.
In Charlotte, CBRE said the vacancy rate for office space in the suburbs is 14.1 percent – well below its peak of 18.6 percent in 2010, and nearly equal to its pre-recession low of 13.9 percent.
“The suburbs are having a hard time shaking the perception that they’re struggling to keep up with the allure of vibrant downtowns,” said Andrea Cross, Americas head of office research for CBRE, in a statement.
And Charlotte’s drop in suburban office vacancy – more than 2 percent from 2015 to 2016 – was the eighth largest drop in the nation among markets CBRE tracks.
“Charlotte is currently experiencing the strongest office market fundamentals on record since CBRE began tracking the market decades ago,” said Patrick Gildea, Charlotte-based executive vice president with CBRE’s Institutional Properties.