KARNES Perspective: Charlotte Office Market Overview – 4th Quarter 2008

Posted on February 6, 2009 by - Charlotte, KARNES Perspective, Office

By Andrew Jenkins, Managing Partner, Karnes Research Company

A total of 44.2 million square feet in 529 multi-tenant, for lease buildings greater than 15,000 square feet comprised the Karnes Charlotte office inventory during the fourth quarter of 2008. New construction in the office sector yielded 635,000 square feet during the fourth quarter as construction completed on four office projects. Supply-side pressure from new completions totaling 1.99 million square feet during 2008 was nearly three times the level reported during 2007 and was the highest level reported since the 2.15 million reported in 2001. Demand, as measured by net absorption, contracted during the fourth quarter of 2008 by 31,924 square feet, resulting in a 1.3%-point increase in vacancy from the 12.2% reported in the third quarter of 2008. Net absorption totaling 670,794 square feet during 2008 was also outpaced by new supply, resulting in a 2.3%-point increase in the regional office vacancy rate. Despite the increase during 2008, the fourth quarter 2008 office vacancy rate of 13.5% remains below the 14.3% reported in the fourth quarter of 2005 and the 16.5% rate reported at the end of 2004.

Supply-side pressure from new office construction during 2009 will be derived primarily from the Uptown Charlotte office market as nearly 3.2 million square feet was under construction at the end of 2008. 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. After yielding nearly two million square feet of new office space during 2008, the suburban office market will likely experience a reprieve during 2009 as only 222,882 square feet was under construction at the end of 2008. Future supply-side pressure could come from the 3.6 million square feet of office space that remains proposed within Charlotte’s suburban office market; however, significant pre-leasing is likely to be required before construction on any substantial portion of this space would begin. (more…)

KARNES Perspective: Charlotte Office Market Overview – 3rd Quarter 2008

Posted on November 6, 2008 by - Charlotte, KARNES Perspective, Office

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…)

KARNES Perspective: Charlotte Office Market Overview – 2nd Quarter 2008

Posted on August 6, 2008 by - Charlotte, KARNES Perspective, Office

By Andrew N Jenkins, Managing Partner, Karnes Research Company

A total of 43.4 million square feet in 520 multi-tenant, for lease buildings greater than 15,000 square feet comprised the Karnes Charlotte office inventory during the second quarter of 2008. New construction in the office sector yielded 634,295 square feet during the second quarter as construction completed on six office projects. Supply-side pressure from new completions totaling 746,595 square feet during the first six months of 2008 was more than four times the level reported during the first six months of 2007 and the level has already surpassed the 692,885 square feet of new office space delivered in all of 2007.

Office construction activity is only just beginning to get heated with more than 4.3 million square feet currently under construction and an additional 4.4 million square feet proposed. Nearly 1.3 million 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. 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…)

KARNES Perspective: Charlotte Office Market Overview – 1st Quarter 2008

Posted on May 6, 2008 by - Charlotte, KARNES Perspective, Office

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…)