Charlotte's towers aren't so empty anymore
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Charlotte's office market is on the up-and-up after years of anxiety about center city turning into a soulless cluster of empty towers.
Why it matters: In 2020, companies that were reconsidering moves paused their plans amid the pandemic and work-from-home shifts. That was bad news for the nation's No. 2 banking town and its business-reliant urban core.
- Now, as companies slowly return to working in person, many are resuming those searches. And Charlotte is getting a lot of the "looks," experts tell Axios.
By the numbers: Office space in Charlotte has been filling up faster than it's emptying for five quarters now, its longest streak since 2019, according to CoStar Group's Chuck McShane. He attributes the uptrend to job and population growth.
- Charlotte ranked among the top markets for employment growth this summer, according to the Bureau of Labor Statistics.
- And per the Charlotte Regional Business Alliance, 157 people are moving to the region every day.
- "Employers are chasing where the talent is going," says James LaBar, senior vice president of economic development for Charlotte Center City Partners. "Odds are in our favor that there's good talent included in those 157."
The big picture: Charlotte is currently offering a wide range of office options across its submarkets, from Ballantyne to Uptown to University City.
- "I've not seen a moment like this," says Michael Smith, president and CEO of Charlotte Center City Partners, "where there are so many choices and opportunities within Uptown as these assets are being repositioned."
- Tracy Dodson, head of economic development at the Alliance, said that when companies look at Charlotte, "to have a deep bench of those opportunities goes a long way."
Let's look closer at some of those options.
Uptown reset
Uptown may be home to the city's oldest buildings, but it remains attractive for its visibility and easy access to clients. Its vacancy rate sits at 24.8%, according to commercial real estate firm CBRE's third-quarter report, but that number is expected to drop.
- Many vintage towers are getting makeovers. Look at One South at Trade and Tryon. In 2022, it lost Alston & Bird and its 200-plus employees to Vantage South End. But the 57-year-old tower has seen success since investing $9 million in amenities, including a cocktail bar, golf simulator and gaming lounge. The average occupancy is up from 52% in 2022 to nearly 76%.
- Meanwhile, older, dated buildings are being converted for other uses, helping to bring down Uptown's vacancy rate. The century-old Johnston Building, for example, is becoming a hotel. The former Duke Energy headquarters is being transformed into 460 apartments, with street-level retail.
- All this is to say, Uptown's vacancy rate could be misleading. Center City Partners calls this wave of conversions and renovations "a reset in the market." The group estimates the area could gain 3,000 more residents from office-to-residential conversions. That could address one of Uptown's flaws: a lack of mixed uses compared to South End.
- Uptown's also become associated with crime, but stakeholders are working to reverse that reputation.
South End's newness
South End — at 19.2% vacant, below the citywide rate of 26.6% — is still without a doubt Charlotte's hottest submarket, fueled by surrounding restaurants, bars, apartments and most importantly, new office construction.
- Workers funnel in and out of Vantage all day long, and 110 East, the newest building in South End, has seen leasing activity pick up this year. It's expected to be fully leased soon.
- Moore & Van Allen has committed to leasing at the nearby Queensbridge, clearing the way for that tower to secure financing.
- Crescent Communities has long planned a 31-story office tower, called Carson & Tryon, across the street at the Enterprise Rent-A-Car site. Building permits signal a possible groundbreaking soon, though the developer says they're focused on pre-leasing right now.
Ballantyne's comeback
Ballantyne — the golf suburb-turned-trendy destination — is drawing companies left and right.
- Northwood Office invested millions reinventing the community, adding a music venue, luxury apartments and The Bowl, a town center-like destination. They've since landed companies like SoFi Technologies, Citigroup, RXO and Daimler Truck Financial Services.
Yes, but: Charlotte submarkets haven't hit the ideal vacancy rate of 13 to 14%.
- Before the pandemic, Uptown was almost too full, with a vacancy rate around 6%, sparking new construction in South End.
What's next: Dodson, with the Alliance, says she's now eyeing where the next, new space will be available, like Iron District, to shop to prospective companies.
- Charlotte is fortunate to attract new companies, Dodson said, and trends in office vacancy aren't as dire as they were two years ago. "But I don't think we're out of the woods yet," she said.