Small Charlotte Medical Building Goes for $166 per SF

CHARLOTTE-Spotting a niche in the small medical office market, Windrose Medical Properties Trust of Indianapolis, IN closed on its seventh property in the last four months, paying a premium $5.65 million or $166.18 per sf for the 14-year-old, 34,000-sf Park Medical Center at 10512 Park Rd. here.

The structure is 92% leased with Carolinas Physicians Network Inc., successor to the Mecklenburg Medical Group, occupying 30% of the building. The 10 tenants individually occupy from 714 sf to 10,101 sf. Average asking rent in the 636,207-sf Park Road submarket is $14 per sf to $16.40 per sf, according to third-quarter data from the Charlotte office of CB Richard Ellis Inc.

Windrose has invested $63.1 million in acquisitions since it was formed in August and is scouting for more comparable purchases, Fred L. Farrar, the firm’s president and chief operating officer, says in a prepared statement.

“Both our acquisition pipeline and development pipeline are robust for adding properties beyond those outlined in the IPO (in August),” Farrar says. He plans to close on more deals before year end and announced the REIT’s first dividend to shareholders.

Windrose was formed to acquire, develop and manage specialty medical properties such as medical office buildings, outpatient treatment and diagnostic facilities, physician group practice clinics, ambulatory surgery centers and specialty hospitals and treatment centers.

Based on CBRE’s third-quarter office market report, Windrose’s Charlotte acquisition is coming at an opportune moment. Despite an overall vacancy rate of 14.1% (18%-plus counting vacant sublease space), “Charlotte remains an attractive location for business and some large users have (already) targeted Charlotte for the relocation of business units,” the CBRE report says.

Net absorption to date is only 599,820 sf, primarily due to the delivery and occupancy of the 900,000-sf Hearst Tower in the central business district. Vacancy in the high-profile, 13.1-million-sf CBD is at 9.5%, up from 5.4% in the same period last year.

“The CBD remains a question mark as current tenants take advantage of high vacancies to reduce their occupancy costs and shuffle from building to building with little actual expansion,” the study finds.

Still, market recovery is already under way in Charlotte, “although it will not be visible to the naked eye for some time,” the report says. “Although tenants still consider occupancy cost a prime factor in their real estate decisions, we have seen the return of concerns over future expansion capability,” CBRE says. That’s “good news for landlords.”