"We've got some high vacancies in some sub-markets due to the vast amount of construction in a slowing economy, but I think we're going to catch up by the end of the year," Clutter says.
The University area has the highest vacancy rate of almost 17.9%. The North Charlotte office market is 13.9% vacant, according to January/February statistics from the brokerage.
"Tremendous growth in the University market should make that only a blip in the market," Clutter says. "There are around 23,000 employees there now with projections of 40,000 jobs in the near future."
The Downtown market, by comparison, has remained strong with only a 3.1% vacancy rate. Despite new building, Downtown is expected to continue with low vacancies. The most significant office development now under way, Trammel Crow Co.'s 886,000 sf Hearst Tower, is 95% pre-leased.
Last year at this time, there was 3.5 million sf of office space under construction in the overall Charlotte market. This year, that number has been reduced to 2.5 million sf. "So almost a million feet of new construction has been absorbed," Clutter says.
"For Charlotte overall, the office vacancy rate is about 9.3%, but Downtown's low rate skewed that," says Kevin Hall, market analyst for Karnes Research Co. "There's definitely been a slowdown in terms of overall development activity, but Downtown remains a very hot market."
Factors contributing to lower demand include the economic problems of dot-com companies, where demand slowed after mid-2000. The demand for technology and banking tenants also was on the decrease.
Total office inventory rose to 29.2 million sf last year. The Downtown market made up 11.8 million sf. Class A represented 60% of the overall inventory, with class B representing 33% and class C taking up 7%.
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