By Andrew N Jenkins, Managing Partner, Karnes Research Company
A total of 42.75 million square feet in 514 multi-tenant, for lease buildings greater than 15,000 square feet comprised the Karnes Charlotte office inventory during the first quarter of 2008. New construction in the office sector yielded 112,300 square feet during the first quarter as construction completed on two office projects. Although supply-side pressure from new completions was fairly low during the first quarter, the office market is expected to see significant levels of new construction in the next 12 to 18 months as nearly 4.7 million square feet is currently under construction and an additional 3.5 million square feet is proposed. More than half of the office space currently under construction in Charlotte is concentrated Uptown, with a significant portion of the total located at the 1.5-million-square-foot Wachovia office tower. Uptown also maintains the highest share of expected future development with a 23% share, or 817,000 square feet, of Charlotte’s proposed office construction.
At 11.0%, the first quarter 2008 vacancy rate for the Charlotte region was down 0.2% of a point from the 11.2% reported at the end 2007. The first quarter 2008 vacancy rate is also 2.3% points lower than the 13.3% reported at the end of 2006 and 3.3% points lower than the 14.3% reported at the end of 2005. This rate is also below the 12.4% averaged since 1988 and is the lowest rate reported since the second quarter of 2001 when regionally vacancy was 10.8%. Vacancy typically increases when new supply (measured by completions) outpaces demand (measured by net absorption). During the first quarter new supply totaling 112,300 square feet was outpaced by net absorption totaling 166,084 square feet. The gap between quarterly net demand and new supply resulted in the 0.2% of a point improvement in vacancy during the first quarter. (more…)