Absorption Continues to Keep pace with a Healthy Pipeline of New Construction
As significant deliveries officially hit the market, net absorption finished 2017 at negative (268,842) square feet in the 4th Quarter.
Rental rates grew slightly to $25.93 per square foot overall for the Charlotte market. A healthy pipeline of construction and strong demand remains the driver for rising rental rates as CBD Class A product reached $32.46 per square foot.
Speculative office development picked up with several projects breaking ground Q4 of 017. The year ended with over 1.9 million square feet under construction in Charlotte.
Tax-Overhaul was and remains a topic of conversation across the nation. Expect this overhaul to have immediate impact on institutional investments that were put on hold in late 2017 as investors closely watched the national landscape.
Q4 2017 Charlotte Office Market Summary
Substantial deliveries resulted in absorption dipping into the red for the first time since Q1 2017. More product is expected to deliver in 2018 with several speculative developments breaking ground Q4 2017. Some of the most notable include Insite Properties’ 107,000 square foot “The Refinery”, Stiles’ 64,000 square foot 300 W. Summit project, and TPA Group’s 120,000 square foot development, “The Edison at Arrowood”. Following completion of these developments, construction is expected to reload with over 500,000 square feet of urban Class A office being planned.
Absorption is expected to keep pace with these new deliveries as market indicators point to organic growth as well as out of market expansions eyeing Charlotte for cost of living and quality of life. Charlotte also remains on the national stage for newcomers with over 100 people moving to the MSA every day. This only heightens the local war for talent and pushes the need for amenity rich office space. Expect market trends to remain stable and strengthen as the first quarter of 2018 begins.