Executives in Ballantyne Corporate Park turned over shovelfuls of dirt this week in something the office park hasn’t seen in a few years: a groundbreaking.
But Tuesday’s ceremony was for the start of construction on a new YMCA, not another one of the speculative office buildings Ballantyne is known for. Still, executives at Bissell, the developer and owner of Ballantyne Corporate Park, have building on the mind again as office vacancy rates tighten up and the demand for more office space continues to grow.
Ned Curran, president and CEO of Bissell, said there’s about one building’s worth of space available in Ballantyne Corporate Park – enough to meet demand for a year or a year and a half, he estimates.
“We’re feeling demand. The pace hasn’t let up,” Curran told me. Ballantyne Corporate Park’s tenants include growing companies such as MetLife, Snyder’s-Lance and TIAA-CREF. But Curran isn’t ready to say exactly when Bissell will start building again.
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“Don’t get ahead of me now,” Curran says with a smile.
The office vacancy rate in the Ballantyne/South submarket – of which Ballantyne Corporate Park accounts for a major chunk of space – was 15.6 percent in the first quarter, according to real estate analysis firm Karnes. That’s down from 20.2 percent in 2012. The vacancy rate is higher than uptown, with a 10.7 percent vacancy rate, and SouthPark, at 13.9 percent.
Ballantyne has always been about speculative development, with almost all of its office buildings constructed before tenants were signed. Curran chuckles when he thinks back to the difficulty of luring tenants to the first office building in 1997, when it sat in the middle of still-empty fields.
“Why did you bring me way out here?” Curran remembers the first prospective tenant asking his broker.
But lingering uncertainty over the state’s incentives program – which has been out of money for months – could be a roadblock to new construction in Ballantyne. The state legislature has been at odds on North Carolina’s budget, with the N.C. House and Senate passing very different plans.
Under the House plan, the state would double the amount it could spend on its main incentives program to $45 million every two years. The Senate plan calls for a $15 million cap on the Job Development Investment Grant program, while offering bigger amounts to large employers bringing 2,000 or more jobs and $750 million worth of investment, like an auto plant. The Senate plan would also limit the share of incentives that could be spent in Mecklenburg and shift more to rural counties.
Incentives have been crucial to luring tenants to Ballantyne’s spec buildings in the past. MetLife largely filled Ballantyne’s most recent pair of speculative buildings, finished in 2012. The company has hired more than 1,500 employees who now work at its Charlotte hub. MetLife, which brought a similar number of jobs to Cary, is set to receive $87.3 million worth of state incentives over 12 years.
“It’s disappointing to see the delays in bringing forth some resolution to where we are with incentives. ... We just don’t know whether we have a tool to offer,” Curran said.
But he said the decision on when to build isn’t solely based on incentives.
“It does inform us in looking at timing. ... There are a lot of decisions you go through – the financing environment, what level of demand we see – it’s one of those factors,” said Curran. “(Incentives) wouldn’t be the only factor, but it’s certainly one of those factors.”
Elsewhere in Charlotte, office building has picked up again. Uptown, a 25-story tower called 300 South Tryon is under construction, while Portman Holdings and Crescent Communities are planning to start 19- and 27-story towers, respectively, this year. And in SouthPark, Lincoln Harris is building a pair of 10-story offices called Capitol Towers.
Charlotte Chamber CEO Bob Morgan has said the incentives uncertainty is hurting economic development. From January through the end of May last year, Mecklenburg County attracted almost 2,300 new jobs and $300 million worth of capital investment, Morgan said in a recent letter to the Observer. For the same time period this year, just under 800 jobs and $147 million worth of new investment were announced.
“The lack of funding for the (Job Development Investment Grant) program is having a major impact on job growth,” Morgan wrote.