Demand Weak for 'B' Office in a Tight 'A' Uptown Market

CHARLOTTE-With a vacancy rate of about 3% in the 8.7 million-sf class A uptown office market, property owners of class B assets assumed their time was coming to fill empty premises. But that isn’t happening despite lower rents and an abundance of class B product.

Brokers say expanding companies Uptown may have to consider class B space or look elsewhere. Carolinas Real Data Inc. feels the tight class A market will continue as it has for the past four years. The construction of the 46-floor, 950,000-sf Hearst Tower will do little to put more available class A space on the market. The office tower, still under construction, is already leased up with the exception of 35,000 sf.

Tenants able to find class A space in this market are paying from $25 per sf to $30 per sf. For companies that don’t need all the amenities that go along with prime real estate, there is an abundance of class B space going for $18 per sf to $21 per sf. According to Gary Chesson of Trinity Partners, the inventory of class B space is only going to increase. He notes that a number of renovated properties are being returned to the market as class B.