By Andrew N Jenkins, Managing Partner, Karnes Research Company
A total of 43.6 million square feet in 525 multi-tenant, for lease buildings greater than 15,000 square feet comprised the Karnes Charlotte office inventory during the third quarter of 2008. New construction in the office sector yielded 613,400 square feet during the third quarter as construction completed on seven office projects. Supply-side pressure from new completions totaling 1.36 million square feet during the first nine months of 2008 was nearly three times the level reported during the first nine months of 2007 and the level has nearly doubled the 692,885 square feet of new office space delivered in all of 2007. Demand, as measured by net absorption, totaling 235,490 square feet during the third quarter and 744,082 during the first nine months of 2008 has been unable to keep pace with this new supply, resulting in a 0.9% of a point increase in the regional office vacancy rate. Despite the increase during the past nine months, the third quarter 2008 office vacancy rate of 12.1% remains below the 13.9% reported in the third quarter of 2006 and the 14.4% reported in the same period in 2005.
Supply-side pressure from new office construction is likely to increase significantly as nearly four million square feet of office space is currently under construction and an additional 4.4 million square feet is proposed. An additional 705,000 square feet of the office space currently under construction appears likely to be delivered by the end of 2008, bringing this year’s completion total to approximately two million square feet. The projected total will result in the highest level of completions reported since the 2.1 million in 2001 and will easily surpass the 1.3 million square feet averaged each year since 1988. The remainder of the new supply in 2008 will be derived primarily from suburban office construction, while more than three million square feet currently under construction in uptown Charlotte will not likely deliver until 2009. With the scheduled completion during 2009 of the 1.5-million-square-foot Wachovia Corporate Center, the 750,000-square-foot 1 Bank of America Center, the 390,000-square-foot NASCAR Plaza, and the 360,342-square-foot 440 South Church building all uptown, the Charlotte market appears poised to challenge its record of 3.6 million square feet of completions set in 1999. (more…)