State of the Charlotte Office Market
In a macro-sense, not a lot has changed…
…as far as market activity and deal volume. Demand and activity remain low and slow. The most notable news is that seven buildings in Uptown Charlotte are in default or in the process of going into default.
First Citizens
Johnston Building
Wake Forest University Building
One Wells Fargo
525 North Tryon
440 South Tryon
Charlotte Plaza
We suspect that there will be others that join these. The combination of increased interest rates and upcoming loan maturities have created most of the issues with these assets, but the bigger problem is that most of these assets were purchased at the height of the real estate market at low cap rates (5%-7%). As a result, we believe there will be a reset of real estate values in Uptown.
The Real Unknown
One Wells Fargo
The real unknown is how employer consolidation will impact other buildings in Uptown. Wells Fargo’s departure (600k sf) from One Wells Fargo was a catalyst for the troubles it is currently experiencing. Ally’s departure from 440 South Church had a similar impact when they moved into their new building. To some extent, Bank of America’s departure from 525 North Tryon has also led to its distress. Duke Energy’s departure from 400 South Tryon led to the building going into default last year. You have to wonder what other problems are lurking around the corner as some of these larger leases roll.
As it relates to large, companies located Uptown, we are seeing a trend of users choosing to move further south in Uptown and in some cases just outside of Uptown (Vantage SouthEnd). Some recent large relocations to these areas are Alston & Bird (moved from One South, formerly BoA Plaza), Holland & Knight (moved from One South), CBRE (moved from Charlotte Plaza), Grant Thornton (moved from Charlotte Plaza), Gresham Smith (moved from Charlotte Plaza) Accenture (moved from Charlotte Plaza) and Winstead (moved from Fifth Third Center). Other large relocations in Uptown include Robinson Bradshaw (moving from Independence Center to Legacy Phase IV), Cadwalder (moved from Carillon to Six50 @ Legacy Union), and Katten (moving from 550 Tryon to 615 Regions). In most cases, these firms downsized, some more significantly than others. Only Cadwalder and RBH took the same or additional space.
Renew or Relocate?
Carillon Building
Specifically in Carillon, KBS has renewed GSA on the 16th and 17th floors, BlackArch renewed on the 22nd floor, GreerWalker expanded and renewed on the 10th and 11th floors, and we are hearing that Brown Brothers will be potentially relocating from their space on the 21st floor when their lease is up.
Moore Van Allen (MVA) (170k sf) and Ernst & Young (EY) (40k sf) are in the market to possibly relocate from the Bank of America Corporate Center. They are looking at two, new developments that will be just outside of Uptown (Queensbridge Collective and Carson & Tryon). There is a possibility they both renew in the Corporate Center, but it will depend on Bank of America, who has been consolidating their employees in Uptown since the start of the Pandemic. So, the jury is out on whether MVA and/or EY will decide to move now or renew.
Despite the doom and gloom, there is a fair amount of new and proposed development.
Legacy Phase IV (410,000 sf) should deliver in September of 2024. Robinson Bradshaw took the top 4 floors. East West Station (363,984 sf), just outside of Uptown, delivers in March of 2024. Also, Queensbridge Collective, Carson & Tryon, and Legacy Phase V are all proposed developments in this area of town. If all three of these break ground, it will add 1.8 million square feet.
Maynard Nexsen has recently signed a lease to relocate to the 23rd floor of the Carillon building. They are currently on the 15th floor. Landlords are starting to feel the pressure to make deals. As a result, we have seen concessions (improvement allowances, free rent, etc.) grow to keep and win tenants.
Legacy Phase IV
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