Photo: Katie Peralta Soloff/Axios
As in other major metropolitan areas, Charlotte has an oversupply of vacant or underutilized office space due to the home working policy introduced by the pandemic.
As with other metropolitan areas, Charlotte faces a housing shortage as more people move here, and there is a growing need for affordable housing.
- So the natural question might be: why not convert these huge offices into apartments?
- In Charlotte, city and development policymakers are currently considering just that.
Why it matters: Redeveloping millions of square feet of unused or underutilized uptown office space would not only alleviate the housing problem, but could create a new revenue stream for property owners, thereby increasing the city’s tax base.
- It could also help revitalize Uptown and attract thousands of new residents.
Yes but: It’s not that easy to tear down a few walls and replace the desks with queen-size beds and kitchen cabinets. Converting an office building into apartments involves upgrading plumbing and electrical systems, adding more windows to let in natural light, and converting entire, sprawling floors into more compact apartments.
- While converting vacant office space into apartments or other uses may open up a new revenue stream for property owners, it is costly.
Office conversions are already taking place. Last year, Duke Energy sold its 800,000-square-foot building at 526 S. Church. The property’s new owner, MRP Realty, will convert the 13-story tower into 450 apartments, CBJ noted. The site will also include retail.
What you say: “Changes like this will breathe new life into buildings while transforming our downtown area into a livelier, greener neighborhood – and that will only catapult our position as a world-class city,” said Cameron Barradale, Charlotte studio head for Gensler design and architecture firm.
Using the numbers: According to CoStar, Uptown buildings built before 1990 have a vacancy rate of nearly 34%, which equates to about 11 million square feet of space. “That’s likely to increase further as some of these other companies announce plans to move,” says Chuck McShane, director of market research at CoStar in Charlotte.
- To put that in perspective, the Bank of America Corporate Center in Uptown is 1.2 million square feet.
- Among the companies that have cleared space in Uptown in recent years: Grant Thornton and Robinhood.
There are at least 10 office towers in Uptown, with more than half the space reported as available for rent, Charlotte Ledger reported this week.
In total, According to CoStar, the vacancy rate in uptown office space is around 20%. Vacancy rates are higher in older, dated buildings as employers increasingly seek newer, sleek properties within walking distance to amenities like entertainment venues, restaurants, and breweries.
- This so-called ‘flight to quality’ has seen an increasing number of employers – from Accenture to law firm Alston & Bird – relocate their offices from Uptown to the South End in recent years.
“We built other brand new spaces in Charlotte at a time when office use was declining,” says McShane, referring to the South End. “Currently there is not so much demand for us to refill the older areas.”
LatelyWells Fargo has listed its prominent uptown property at 301 S. Tryon St., which includes an early 1970’s 30-story office tower, an 11-story office building, a plaza and the building’s atrium.
- Gensler has developed a tool that assesses office building compatibility “for adaptive reuse, conversion, and refurbishment.” Based on a number of factors, from the shape of the 301 S. Tryon tower to its accessibility to public transportation, the company concluded that the tower is a good candidate for remodeling.
- CBRE, which lists the property, has said nothing further about plans for it.
Courtesy of Gensler
Zoom out: Office vacancies can leave older properties with insufficient cash flow to pay off their debts, Gensler noted in a recent report.
- The relocation of large commercial tenants costs a city significant tax losses.
Between the lines: The older, vacant office space is what the city government is contemplating for a different use.
“This space is interesting to us because it may need to be repurposed or redesigned due to the changes that have occurred in office use during and after the pandemic,” said James LaBar, Director of Economic Development at Center City Partners. to Axios.
The city is considering three strategies to “redesign” vacant uptown real estate, LaBar says.
- Conversion of parts of the building. This could include renovating prominent parts of the property, such as the main lobby, to make it more welcoming to tenants and guests. That’s what Crescent Communities did at One Independence Center, spending $25 million to rejuvenate the lobby and retail spaces.
- Conversion of entire office buildings into medical facilities, laboratories, hotels, universities or residential buildings.
- Including multiple uses in a new building. In the new FNB Bank building, for example, there are office and living spaces.
“In all probability, there is no panacea in all of Charlotte. Multiple solutions will be deployed,” LaBar tells Axios. He declined to specify which office buildings are being considered for conversion by city leaders or developers.
The big picture: According to CBRE, 13.44 million square meters of space in the nationwide office market will be used for other purposes this year. That’s more than double the 6.37 million square feet of office space that was remodeled last year.
- In Minneapolis, local developer Sherman Associates has proposed converting the 13-story Northstar Center East Tower downtown into 216 apartments, 20% of which will be set aside for affordable housing, Axios’ Nick Halter reported.
- In downtown San Francisco, where the office vacancy rate is nearly 30%, city leaders have proposed measures to make it easier and cheaper for developers to convert unused office space, Axios’ Emily Harris said.
Remarkable: Because many office buildings have large floor slabs — a term that refers to a building’s leasable area — they are often better suited to life science tenants (such as labs and R&D facilities) than apartments, according to CBRE.
Still, during the pandemic has accelerated the trend, it’s not new.
- In downtown Winston-Salem, for example, the 1920s building that housed the RJ Reynolds Tobacco Company’s headquarters was repurposed in 2015 and turned into a Kimpton Hotel, the gathering reported. The following year apartments called The Residences @ the RJ Reynolds Building opened, along with a bar on the ground floor
“This is truly an intergenerational opportunity to reimagine the mixed-use character of Uptown. “As offices evolve, so do some buildings,” says Barradale.
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