A City on the Rise: Charlotte Office Market Poised for Growth and Recovery

by John Nelson

Last year posed many challenges for Charlotte’s office market, as companies continued to delay making decisions about their office space needs. In the fourth quarter, leasing velocity had slowed, with limited deal activity driven largely by lease expirations. But the city still scored several corporate relocations and expansions, faring well compared to other major cities throughout the country. Fast-forward to June 2021, and the light at the end of the tunnel is getting brighter as more occupants set re-entry plans for this fall.

This is a transformative year for Charlotte. Commercial Café ranked the Queen City as No. 5 in the United States for the most anticipated office deliveries in 2021 with more than 4.1 million square feet delivering in the metro area this year. Uptown added to its skyline with the addition of 366,000 square feet at Legacy Union Two, the completion of the 742,000-square-foot Ally Charlotte Center, Honeywell’s 330,000-square-foot corporate headquarters delivering later this fall and the 156,415-square-foot FNB Tower delivering this summer.

Chase Monroe, JLL

At the end of the first quarter, new construction in Uptown was more than 82 percent preleased. And as more tenants seek out highly amenitized and efficient space, new construction is expected to be the primary beneficiary.

Many notable recent deals point to this trend of flight to quality. Our team recently represented USAA in its lease of six floors, or about 93,000 square feet, at The Square at South End. The firm will create 750 new jobs and will begin moving employees into the new facility by the end of 2021.
Robinhood also recently signed a 47,000-square-foot lease agreement at 650 South Tryon, the second office tower at Lincoln Harris’s Legacy Union development in Uptown. This represents an $11.7 million investment and plans to create nearly 400 jobs in the city. During its site selection process, the company narrowed its focus to only include newly constructed offices in Charlotte’s Uptown and South End neighborhoods.

In May, Credit Karma announced its plans to expand the firm’s Charlotte operations, adding 600 jobs and investing $13 million to transform its existing operations into its East Coast headquarters. This includes adding 96,000 square feet to its Ballantyne-area office, increasing its total national footprint to over 300,000 square feet.

While full recovery will take time, this deal momentum is a positive sign that it’s no longer a matter of if companies will return to the office, but when. In Charlotte, a large percentage of the Central Business District is occupied by five major corporate users, many of which have plans in place to transition back to the office this fall. Additionally, with a high volume of office inquiries and lease negotiations resuming in January, it’s reasonable to expect an influx of deals to close in the second half of the year.

Fintech thrives
Long known as a hotspot for banking and financial institutions, Charlotte is emerging as a fintech leader due to its financial services prowess. More companies with a presence on the West Coast are interested in growing in North Carolina, where they have greater access to highly skilled talent and can enjoy a lower cost of living and doing business.

USAA’s major investment and Credit Karma’s expansion of its East Coast headquarters are a testament to this, and North Carolina’s emerging technology ecosphere will continue to draw out-of-state companies looking to expand. In fact, Charlotte is now home to over 60 fintech companies, positioning it to become a dominant force in the industry.

A rising-star city
The pandemic has accelerated migration trends to “rising-star cities” like Charlotte and, as a result, investors are following suit.

A recent JLL report found that institutional investment in Charlotte grew 151.8 percent, from $4.8 billion in the years 2010 to 2014 to nearly $12.2 billion between 2015 and 2019. Between 2010 and 2014, about $627 million in foreign investment occurred in Charlotte. That increased 346.5 percent in the years 2015 to 2019 to $2.8 billion.

The Charlotte office market retains the intangibles that made it a vibrant economic destination before the pandemic. Charlotte will thrive in a post-pandemic environment, as its access to talent, high quality of life, low business costs and affordable cost of living drive growth.

— By Chase Monroe, Carolinas Market Director and Charlotte Brokerage Lead, JLL. This article originally appeared in the June 2021 issue of Southeast Real Estate Business.

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