SouthPark is getting a skyline — 19 stories’ worth, in fact. The plan for a new office building comes as Charlotte has seen little new office development recently because of high construction costs and still-uncertain demand for office space after COVID. For more, The Charlotte Ledger’s Ashley Fahey joined WFAE’s Marshall Terry for our segment BizWorthy.
Marshall Terry: What can you tell us about this new tower planned for where Rooster’s Wood-Fired Kitchen is today, and how does it fit into what appears to be the start of an office boom in SouthPark?
Ashley Fahey: So, Hines they've recently made a lot of investments in Charlotte, including buying the Design Center in South End and Birkdale Village in Huntersville. This would be their first ground-up project in Charlotte. It's calling for a 19-story office tower as well as a separate 19-story apartment building. It is notable in a market where we haven't really seen a lot of new office towers announced since the pandemic that they're coming out with this big project.
I think it's also notable to your point that it's in SouthPark, which is seeing kind of an office boom between the Amwins headquarters that will soon be underway on Sharon Road. TowneBank is building a bigger regional headquarters on Carnegie Boulevard.
Terry: I guess we’re going to have uptown, South End, Ballantyne and SouthPark as kind of their own skylines.
Fahey: Yeah, SouthPark's always been an office market. Folks I spoke with for the story, they've noted that SouthPark kind of historically was a small tenant market, 10,000 square feet or less, and now we're seeing JPMorgan Chase and other groups taking over 100,000 square feet. So it's becoming a bigger office market and more substantial one and just a more urban and dense sort of neighborhood.
Terry: So is the lull in office construction I mentioned at the beginning over then?
Fahey: I’d say it’s a little more nuanced than that because even with this project, the developer needs to see a certain amount of the building preleased, which means a company is going to commit to take a certain percentage of the building before they break ground. I think that just speaks to the high cost of construction for office projects and the challenging kind of debt market right now to do these types of deals. So even this is not imminent, but I do think it may be an early first sign of a change in the office market.
Terry: Sticking with development, well-known Charlotte firm Crescent Communities said recently it’s laid off 15% of its workforce. This is the company behind the River District and many of the local high-end apartment buildings built over the past decade. What did Crescent say is the reason for the layoffs and what does it indicate about development in Charlotte right now?
Fahey: Crescent was a little vague as far as the reasons. They basically said in a statement that they are making organizational changes that resulted in a reduction in headcount. They said the changes were a result of both opportunities to more efficiently operate, and they also, of course, cited the slower development and investment environment.
I do think that is accurate. Just like we just talked about, the Hines project, it is notable that there's a new office tower being proposed here, but it's really been a very slow development market. We think of Charlotte as a booming city, but it's been tough to get a lot of projects built, again, in this high-cost-of-capital environment we're in. We have a kind of apartment glut, a little bit right now. I do think that will moderate in the next couple of years. It's just a slower market right now.
Terry: Finally, Charlotte homes are sitting on the market for longer. How big is the increase in days-on-market? How do we compare to other places, and what’s driving the change?
Fahey: REMAX found in June that Charlotte homes spent about 49 days on the market, which sounds like a lot, especially when you think about where we were at a couple of years ago during the pandemic. Homes were selling and going under contract so fast that the average was 10 days. I think we're just getting back to a more moderate market. With higher mortgage rates, we just don't have as many people in the market right now because of affordability concerns. We are kind of middle of the pack, even though we have seen an increase in the number of days homes are sitting on the market. There are some places in the U.S. where homes are sitting on the market for 80, 90 days on average. I talked to someone over at REMAX, and she indicated it's definitely reflective of a shift that we're seeing in the market, but it's nothing to really necessarily be concerned about.
Support for BizWorthy comes from the law office of Robertson & Associates.
