Bank slip

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CHARLOTTE — In the second quarter, Bank of America and Wells Fargo abandoned a combined 197,820 square feet of uptown office space, according to Karnes Research.

That amounts to 1.3 percent of the roughly 13.3 million square feet of Class A office space in uptown.

In normal times, that much space coming back on the market in one quarter would have a ripple effect on the office market, dragging down rents, some in the real estate industry say.

The good news for tenants is that, according to industry officials, rents haven’t been impacted by the BofA and Wells Fargo vacancies.

But the fact that it didn’t nudge rates downward is further evidence of just how depressed uptown’s office market is, those in the industry say.

“If this had happened years ago, it would have had a bigger impact,” said Ross Howard, an analyst with the Charlotte office of Chicago-based Jones Lang LaSalle.

“If you look at the Charlotte downtown market from three or four years ago, the overall average asking rents (for Class A space) were about $30 per square foot when you had a vacancy rate of 4 percent or lower,” he said. “Now, the average is close to $23 or $24 per square foot, so that shows the impact of when space is vacated.”

Howard declined to comment on any specific deals in uptown but said that, in general, when large clients pull out of office space it can drag down a recovery of the central business district.

Roger Cobb, senior vice president for Charlotte-based NAI Southern Real Estate, said the BofA and Wells Fargo news didn’t come as a surprise.

“A lot of that space was underutilized by the banks,” Cobb said. “There has been shadow space in downtown for the last three or four years, and the banks have been a big part of that. And it has been a tenant’s market for the last three or four years.”

Shadow space is a term for space that a company is leasing but not using, with downsizing being a typical reason.

In today’s market, tenants still wield lots of power when it comes to negotiating lease deals, Cobb said. Still, he said, the office space being dumped on the market because of the Bofa and Wells Fargo vacancies aren’t expected to give tenants more of an upper hand or vice versa, he said.

BofA abandoned 103,122 square feet, at 525 N. Tryon St., while Wells Fargo did the same with 94,698 square feet at Charlotte Plaza, 201 S. College St., according to Karnes.

Opened in 1998, 525 N. Tryon St. features 19 stories, while 201 S. College St. has 27 floors and was built in 1982.

Although uptown gained Chiquita Brands International — the company is moving its headquarters from Cincinnati to Charlotte — in the second quarter, the vacancies created by BofA and Wells Fargo resulted in negative absorption of 125,333 square feet of Class A office space, according to Karnes.

Chiquita was uptown’s largest tenant gain in the second quarter, as the company completed the first phase of its move to NASCAR Plaza, according to Karnes. That first phase was composed of 53,519 square feet.

“We had Chiquita taking part of their space at NASCAR Plaza, but all that good news was washed out because of the big moves by the big banks,” said Andrew Jenkins, a researcher for Karnes. “The big banks can move a lot of the downtown Charlotte market with just a few decisions.”

Also during the quarter, Scor Global Life Americas left 140,000 square feet at 401 N. Tryon St. and moved into the same amount of space at Bank of America Plaza.

Jenkins said Karnes had been expecting the BofA and Wells Fargo vacancies, but not until next year.

“Bank of America’s move is part of their overall downsizing,” Jenkins said. “This is part of their consolidation plan. They are trying to get out of third-party space and move back into their own space instead of leasing from other people.”

Jenkins, like Cobb, said the vacancies are a setback for the recovery of uptown’s office market. But, Jenkins said, the vacancies aren’t likely to affect asking prices for Class A space, which Karnes reported at $26.75 per square foot on average in the second quarter.

“If Bank of America continues to do more consolidation like this, it could continue to drag down the downtown submarket,” he said. “And if they ever decide to move out of space they own, as opposed to space they lease, that would have a huge impact.”

Howard said the banks are committed to staying in Charlotte. But like many companies in the wake of the recession, they are trying to make more efficient use of space, he said.

“When you look at the Charlotte skyline, it is about upper-elevator versus lower-elevator bank space,” Howard said. “And in that respect, only Fifth Third Center has any space available above the 15th floor.”

Howard said the market for upper-elevator bank space is a little stronger than lower-elevator bank space.

“In the towers with commanding views — Bank of America Corporate Center, Duke Energy, One Wells Fargo Center, Hearst Tower and Fifth Third Center — you are seeing asking rents close to $30 per square foot,” he said. “On the other end of the spectrum you have Charlotte Plaza, Transamerica, Carillon, 525 North Tryon and 440 South Church where you are seeing rents closer to $25 per square foot.”

Cobb said he’s hopeful that someone else will snatch up the space left empty by BofA and Wells Fargo.

“Maybe that means these owners can find new tenants that will be happy to pay for this space because they are getting more out of it than the banks were at this point in time,” Cobb said.

BofA declined to comment for this story, and Wells Fargo did not return calls.

BAUGHMAN can be reached at [email protected], (704) 247-2911 or on Twitter at @scottmecktimes.