On Thursday, workers will place the highest steel beam at Ballantyne Corporate Park’s newest and biggest office tower – the latest sign that the region’s office market continues to rebound years after the real estate bust and recession.
Ballantyne developer Bissell is building the 10-story Brigham building on North Community House Road on a speculative basis, meaning no anchor tenants were signed before kicking off construction. While Bissell has always built new offices on spec, more Charlotte developers are following suit.
It’s a sign of the office market’s anticipated strength: Developers are betting they’ll be able to find tenants to fill expensive new towers once the doors open, rather than requiring a tenant to sign on before shovels turn any dirt.
Of the large office buildings under construction in Charlotte, only one – 300 South Tryon, by Spectrum Properties – signed an anchor tenant before construction. Capitol Towers in SouthPark (10 stories by Lincoln Harris), 615 South College in uptown (19 stories by Portman Holdings) and 500 East Morehead in midtown (seven stories by Beacon Partners) are all being built on spec.
The latest numbers from the office market show why developers are so confident: Space is tight and rents are rising.
A report from Cushman & Wakefield found the third-quarter vacancy rate last year fell to 9 percent in Charlotte, down from 10.2 percent at the same time last year. That’s down from nearly 15 percent in the wake of the recession in 2010, and below the historic average vacancy rate of 12.1 percent.
The average asking rate for new leases rose to $21.99 a square foot, up nearly 10 percent from the same quarter a year ago.
“The office market is in need of the new construction underway to give tenants alternative options and to help attract national companies to Charlotte. Due to limited big blocks of available space in select submarkets, lease rates will continue to rise,” wrote Keith Bell, a Cushman & Wakefield senior vice president who represents tenants, in the report.
Not all of the city’s new office buildings are being built as spec projects, of course, and not all planned projects are moving forward. Trinity Capital Advisors recently canceled 1000 South Tryon, a 14-story tower at Morehead and South Tryon streets, because it couldn’t find an anchor tenant and didn’t want to build a speculative tower.
Other companies are building new headquarters for themselves, such as Dimensional Fund Advisors in South End or Sealed Air off Billy Graham Parkway. That adds to the area’s office stock but doesn’t provide the space for new companies that spec buildings do, because the new buildings will be immediately occupied by a single tenant.
Looking ahead, more new towers are on the horizon. Crescent Communities is planning a new tower at Stonewall and South Tryon streets called Tryon Place. Crescent executives have said they will move forward on a speculative basis with the tower, but haven't broken ground yet. At 700,000 square feet, it would be larger than any of the new office buildings under construction.