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News release

Charlotte, NC

Development pipeline reloads in central business district

JLL’s 2017 Skyline report reveals strong velocity in downtown leasing


​Charlotte, NC (July 18, 2017) – When it comes to premium office space across the United States and Canada, creative firms are doing what they do best: driving change. JLL's 2017 Skyline shows that creative's boomerang to this coveted space and the eighth straight year of occupancy growth are contributing to record rents and a landlord-friendly market. In Charlotte, deal velocity has pushed year-to-date net absorption to just over half a million square feet, on pace for a record year. A healthy development pipeline of 1.5 million square feet under construction, decreasing vacancies and climbing asking rates are all indicators of a robust market for this premier group of office buildings. The real estate market is a reflection of a surging economy. The region created 41,000+ jobs over the past year with office (information, professional and business services, and financial activities) jobs accounting for 29 percent of the growth.

Skyline is JLL's annual look at office space within some of the tallest buildings in 57 markets across North America. Some highlights from this year's edition include:

  • Skyline vacancy within the Charlotte market remains below the national average at 8.9 percent, with vacancy of Trophy buildings – those ultra-premium office towers at just 2.9 percent.
     
  • In the last 12 months rents grew by 4.9 percent, hitting a record $30.95 per square foot, with many of the trophy assets surpassing $35.00 per square foot.
     
  • Recently delivered 615 South College Street is now home to WeWork, occupying 51,547 square feet.
     
  • The continuation of the Lynx Blue through Uptown and into the University submarket is expected to drive development in the North Tryon corridor of Uptown.

     

​"Due to a large millennial population migrating to Uptown and adjacent neighborhood South End, companies are reaping the benefits of a large college-educated workforce to pull from," said Paul Hendershot, Director of Research for JLL Carolinas. "Traditionally law firms, financial institutions and other professional services groups were the main drivers of leasing activity within Skyline buildings. Anchored by AvidXchange, Charlotte is a unique position to foster the emerging FinTech industry, bridging our rich history with financial services and technology infrastructure."

Landlords on top, for now

CBD net absorption jumped to 553,000 square feet – 28 percent higher than what it was a year ago. However, eight straight years of Skyline occupancy growth are expected to ease soon as the market prepares for several large blocks of space to become available.

Nationally, Skyline vacancy sits at 12.9 percent – well below the overall national average of 14.5 percent. Just 10 percent of Trophy space (think Chicago's Willis Tower and New York's One World Trade Center) is available, giving landlords the upper hand. That may change as new deliveries create a slow rise in vacancy in 2018.

A rising tide lifts all boats

Tenants still want that Skyline cache, which is why average rents jumped to $30.95 per square foot. For those coveted few Trophy spaces, that premium shoots north of $35.00 per square foot. As Class A and Trophy assets continue to experience higher rents, landlords are feeling the pressure to upgrade existing buildings to keep pace. First Citizens Bank Plaza, Bank of America Plaza, 400 S. Tryon and 300 South Brevard are undergoing significant renovations to the exterior and interior.

Buyers selectively target the skyline

"Historically, investors looked to Charlotte as an opportunity for additional yield. Currently, capital is looking to Charlotte for the underlying fundamentals: population growth, job growth, rental growth and ability of continued appreciation, all of which outpace most comparable markets," said Brian Dawson, Managing Director, JLL Capital Markets, Carolinas. "Skyline assets continue to provide stable value, making them an incredibly attractive option for investors," said Jonathan Geanakos, President, JLL Capital Markets, Americas. "We've also seen a large increase in foreign investment into some of the trophy properties included in our Skyline portfolio over the last year over the last year and the beginning of this year. In addition, both foreign and domestic investors are finding secondary market real estate to be more readily available and at a relative discount."

So, just how much do investors love the Skyline?

  • Skyline acquisitions totaled $327.5 million during the last 12 months.
  • Over $1.5 million square feet of office space traded hands with an average price of $206 per square foot.
  • The BB&T Center on 200 S. College Street was the largest deal at $148.5 million and 553,000 square feet.

 

Robust Construction Pipeline

A healthy 1.5 million square feet of Skyline space remains in the construction pipeline, up 6.6 percent since the end of 2016. Recently delivered 615 South College added an additional 381,263 square feet to the skyline. 615 South College is already home to global co-working operator WeWork (51,547 square feet) and Regions Bank (60,000 square feet). Local developer Lincoln Harris and Goldman Sachs secured a 500,000 square foot prelease from Bank of America before breaking ground on 620 South Tryon, an 845,000 square foot office tower expected to deliver in early 2019. In addition, 300 South Tryon (638,500 square feet) is currently over fifty percent preleased with average asking rents of $35.00.  

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About the Skyline

Investors and tenants can access JLL's Skyline via a digital platform. The interactive website features JLL's exclusive market insights regarding office supply, demand, rents, leverage and investment into 57 markets across the United States and Canada. It gives users the ability to compare and contrast individual markets or multiples of markets, as well as individual properties or portfolios. In addition, the site offers videos and infographics, all of which are available via mobile access.

 

About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $136 billion. At the end of the first quarter of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of more than 78,000. As of March 31, 2017, LaSalle Investment Management had $58.0 billion of real estate under asset management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.