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Real Estate Bisnow
January 2, 2013 
Can Pigs Fly?
Office Heats Up!


2013 looks like the year a lot of shovels are going to get dirty, as fundamentals begin lining up, Studley SVP Tim Capps tells us. (Didn't Nostradamus also predict that this year would be a "dirty shovel year?")

Office vacancy rates are trending down, rents are trending up, and there are very few large blocks of quality contiguous office space available, Tim says. “As a result, we’re seeing new construction starts in certain submarkets and anticipate multiple starts in both Charlotte and Raleigh/Durham in 2013, which will include a combination of build-to-suits and spec developments.” In Charlotte, the developments will follow on the heels of Ballantyne Corporate Park, the largest spec office development in the nation in 2012. Leasing activity in Ballantyne and other core office submarkets in Charlotte remains strong.
When it comes to corporate relocations, North Carolina maintains its edge—actually a full-blown advantage—with relatively low labor and real estate costs, Tim adds. (We also have better BBQ than New York...and everyone else.) The state remains attractive for large corporations to expand or establish new facilities for HQs, R&D, data centers, and critical back-office operations. Companies will continue to come here, benefiting the Charlotte and Raleigh/Durham office markets in ’13. “Both markets are Fortune 500 companies' prime markets for expansion,” he says.
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Among Charlotte office submarkets, Selwyn Property Group’s Roger Cobb tells us Midtown has a bright future. The Duke Endowment is the only new office building now under construction in Midtown, but three or four other sites will be in play for large, multi-tenant office users over the next 12 to 24 months. But the change to the market will be more thorough than the addition of new office properties, Roger adds. Apartments are being developed in Plaza Midwood, Elizabeth and South End, Publix will add a new dynamic on South Boulevard, and Walgreen's will eventually get a store in the area.
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New Boston Fund VP of acquisitions David Schneider, in the company’s Southeast office, tells us that “We’ve finally begun to see office fundamentals tighten in the Carolinas, as steady absorption over the past year or so has driven Class-A vacancy near 10% in certain key submarkets.” David expects to see continued tightening and perhaps some rent growth in 2013 as employers add jobs and take space. New Boston will actively pursue value-add opportunities in these markets this year, he says.
In 2013, investors will be looking for Charlotte retail properties, too, Hanley Investment Group VP Kevin Fryman tells us. Recently Kevin, who's based in Southern California, repped Lamar Cos in the sale of the Market on Cherry Road, a 133k SF shopping center in Rock Hill, SC, to Aston Properties of Charlotte, which was repped by Berkley Capital Advisors. "Investors are aggressively pursuing shopping centers in Charlotte due to the population growth and diverse economy, including the fact that Charlotte is the second-largest financial center in the US by assets, after New York."
New Year's Resolution: Read more Bisnow. And sent ideas and suggestions to dees.stribling@bisnow.com.
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