Activity to pick up after summer doldrums.
In the stifling heat of August, the Charlotte office market seemed stagnant and weak. According to Jones Lang LaSalle, Charlotte lost nearly 13,000 jobs in the first two quarters of this year, pushing the unemployment rate to 12 percent. Year-over-year, second quarter office leasing activity fell 32 percent. To further paint a grim picture, Jones Lang LaSalle predicts that downtown Charlotte is in for a double-digit vacancy rate, due to the 2.5 million square feet of office space that will see completion in the next 18 to 24 months.
In reality, the future of the Charlotte office market is much brighter than it looks on paper. “At the street level, a lot of brokers remain pretty busy. There are still deals being done; they’re just taking longer,” says Tim Bahr of Charlotte-based NAI Southern Real Estate. It’s also happens to be the tail end of vacation season, and everything, commercial real estate included, is a bit more sluggish during the twilight of summer than during the rest of the year. “This time of year is typically slow, and with the economy, it just seems like that’s amplified things a bit,” he says.
The office spaces that are frequently being occupied in the current climate are mostly small parcels in big buildings. Large leases can still be found, but landlords have had to smother these transactions with concessions. One of the most standard allowances on the market right now is one month of free rent for every year leased. “Landlords are certainly being realistic and aggressive,” he says. “I don’t see people doing stupid deals. They’re just trying to cut to the chase quickly.”
The downturn has also dealt huge blows to Charlotte-based financial institutions. A few years ago, brokers would have predicted that the downfall of the city’s banks would amount to a doomsday scenario, but instead of stifling the office market, the uncertainty surrounding these institutions has created new room for smaller financial players. “I don’t know that you get those deals in the financial services industry when you have two behemoths commanding all the resources,” Bahr says. “When there’s a little bit of room, companies look at Charlotte and say, great climate, very talented workforce, low cost of living — You’re going to see companies moving here.”
Though Bahr doesn’t see any significant new office development in Charlotte’s future, he says the office market is still doing well. Development will return when the financial markets bounce back and job losses stop. While righting the market can at times feel impossible, there is still life in Charlotte; deals are still getting done.
“Charlotte is still fundamentally pretty strong,” he says. “If you work hard enough, there’s opportunity.”
— Jon Ross