Concessions Shave Up to $5 Per SF From Charlotte Office Rates

ATLANTA-The average vacancy rate for the Charlotte MSA jumped to 14% at the end of second-half this year, up from 10.1% in second-half 2001, according to research from the Charlotte office of CB Richard Ellis Inc.

When “shadow” sublease space is added, “vacancy is at 20%,” says CBRE researcher Ryan D. Clutter.

“While the average asking rental rates have not changed for the most part,” he says in a second-quarter report, “concessions have driven rental rates down by as much as $5 per sf in some areas.”

Because tenants have a lot of options, Clutter says the deal cycle is extended and “many landlords are buying deals with free rent, moving allowances and other cash incentives.”

Some submarkets have benefited. Among them is Midtown, which has become more popular “because of its proximity to Downtown and the availability of free parking,” Clutter says.

Construction in general and spec building specifically has slowed. According to the research, just 236,000 sf is being built throughout the Charlotte MSA, compared with 2.2 million sf of multi-tenant office space under construction at second-quarter 2001.

The asking average rental rates downtown range from $17.27 per sf to $25.40 per sf. The range for the entire market is between $15.38 per sf and $20.69 per sf. The most expensive office space is in the South Park submarket, where the average asking rental rate is between $17.91 per sf and $23.45 per sf.

“If the financial markets stabilize, we expect current market conditions to continue through 2002 and most of 2003,” Clutter concludes. “The office market should slowly follow the economy and start to recover momentum in early 2004.”