KARNES Blog

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. Read the rest of this entry »