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Critiquing Crescent: Adding office space uptown viewed as risky

CHARLOTTE — Now that Crescent Resources has announced the possibility of building 150,000 square feet of office space on an uptown site, some aren’t so sure that’s the best idea.

Last month, the Charlotte-based developer said the office project is one option it’s exploring for the site, which it owns and which features a Goodyear service center and a pay-to-park lot.

But industry officials say that, given the amount of vacant office space across the Charlotte area, now might not be the best time to dump more office space into the market.

Uptown Charlotte“Multifamily would do well,” said Gary Chesson, a partner with Trinity Capital Advisors. The rental market is strong, and multifamily is hot. I think it would be a good fit.”

According to Karnes Research, a company that tracks Mecklenburg County’s commercial real estate market, the vacancy rate in uptown is 14.1 percent. That stat makes the idea of adding office space to Charlotte seem like a risky move.

Andrew Jenkins, managing partner of Karnes, said no office space is under construction in uptown. “It would be fairly significant,” he said, if Crescent built the office space in the next 12 months.

“While it is not a large amount of space compared to the (office) towers built recently, it would likely represent the only new space to come online since the 2.1 million added in 2010,” Jenkins said.

The nearly 2-acre site is at the intersection of South Tryon and East Stonewall streets, inside the Interstate 277 loop and across from the Harvey B. Gantt Center for African-American Arts and Culture.

Chesson said developing a multifamily project on the site would be the most viable move right now. Having an office project make financial sense right now would be tough, he added.

“It’s going to take a lot to deliver that space uptown,” he said. “Rental rates aren’t that high right now, compared to 2007 and 2008. If it’s going to take $30 a square foot to deliver that space, but the rental rate is only $24 a foot, that will present a problem.”

Meanwhile, Charlotte’s rental market is thriving and showing no signs of slumping. Real Data, a Charlotte analytics firm, in March reported that the vacancy rate of uptown apartments was less than 4 percent. Charles Dalton, president of Real Data, said that he doesn’t see the demand for apartments changing anytime soon.

“I think we have a couple of years before the apartment market (in Charlotte) cools off,” Dalton said. “Even if it does … there will still be more demand for people to live downtown than there is now.”

Ned Austin, vice president of Crescent’s commercial division, could not be reached for a phone interview. But, in an email, he said that while his company plans to build something on the property, it isn’t rushing to make a decision on what that will be.

“Crescent Resources has owned this site for a very long time,” he said. “We’ve been exploring various uses and options over the years, and we continue to do that today.”

Crescent plans to put office space on the site, but there might be other uses in addition to that, Austin said, adding that his company is entertaining the idea of a mixed-use project that could include residential, retail and hotel space.

“We’re also keeping our eye on market conditions,” he said. “We are still very much in the exploratory stage and have no definitive plans or timeline.”

With the parking lot and the Goodyear still it operation, Crescent might not move to do anything with the site in the near future. Jenkins said he’s heard of several other office projects that other developers might build, although he doesn’t expect any of them to be built soon.

“Right now, we are likely to be on course to go two full years without any office construction uptown,” he said. “With that said … the 14.1 percent vacancy rate uptown is significantly higher than the 2.5 percent reported back in 2008, so this could be perceived as a risky move,” he said.

 

GUION can be reached at payton.guion@mecktimes.com

 

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