Historical Rental Rates Are On The Horizon
Rental rates show no sign of slowing down as marquee CBD towers should reach $40 per square foot in the not so distant future. This would be the first time Charlotte has reached this milestone.
Absorption dipped in the red in Q2 2018 due to new deliveries and several tenants moving out of large blocks of space. Some movement to note is Lash Group moving out of 93,000 SF at 2320 Cascade Pointe Blvd. and Little Diversified Architectural Consultants moving out of 66,787 S at 5815 Westpark Drive.
Development continues to stay active with a handful of speculative projects breaking ground this quarter. Notable ground breaking's include: Trinity Capital Advisors 200,000 square foot project at Toringdon 7 and Childress Klein's 1540,000 square foot project, The Nexus, which is the second phase of their office development in Waverly.
Charlotte saw a record breaking office sale in the Q2 2018. 615 S. College Street sold for $222 Million ($590 per square foot) which shattered the previous record of $308 per square foot held by the sale of Carillon Towers in 2016.
Q2 2018 Charlotte Office Market Summary
Charlotte continues to stay active in both the Downtown and Suburban submarkets. Absorption fell into the negative for the short term, but it is expected to level out in the third quarter 2018. Although some large blocks were vacated, the second quarter saw some large lease signings as well. Albemarle Corp expanded into 141,500 square feet at Capitol Towers and Bank of America renewed/expanded in Fifth Third Center for a total of 318,000 square feet.
Vacancy will likely dip in the latter part of the year as new developments begins to deliver. There is currently around 3.3 million square feet under construction with the bulk of these deliveries occurring mid-2019. Some developments that will affect 2018 vacancy rates are TPA Group’s 120,000 square foot “The Edison Arrowood” project, Insite Properties 108,000 square foot “The Refinery” and the 63,000 square foot 300 W. Summit development by STILES. All three of these are expected to deliver by year end, likely driving vacancy up in the near term, as the market expectation is that these developments will lease up quickly.