Charlotte

office market
report
Q4 2022

page 1 Charlotte office insights | Q4 2022

Charlotte office market indicators

19.6% -809 ksf $42.11 psf

Charlotte office vacancy increased 560 Net absorption for total office space in Class A asking rent in South End recorded
basis points since year-end 2021. 2022, down 274% from 2021. the highest psf rate in the Charlotte MSA.

4.1 msf 42% $1.3b

The current development pipeline, of Charlotte’s return-to-office rate 2022 investment sales, down 46% from
which 40% is set to deliver by Q3 2023. compared to the week before lockdown. total volume in 2021.

page 2 Charlotte office insights | Q4 2022 Source: AVANT by Avison Young, CoStar
 40
45
50
55
60
65

10
15
20

0
5

page 3
Q4 2018 Q4 2018

Q1 2019 Q1 2019

Q2 2019 Q2 2019

Q3 2019 Q3 2019

Q4 2019 Q4 2019
Existing

Q1 2020 Q1 2020

Q2 2020 Q2 2020

Direct
Q3 2020 Q3 2020

Q4 2020 Q4 2020

Q1 2021 Q1 2021

Sublet
Q2 2021 Q2 2021
Inventory (msf)

Availability (msf)
Q3 2021 Q3 2021

Q4 2021 Q4 2021
Under development

Charlotte office insights | Q4 2022

Q1 2022 Q1 2022

Q2 2022 Q2 2022

Q3 2022 Q3 2022

Q4 2022 Q4 2022

10%
15%
20%

0%
5%
Q4 2018
-500,000
1,000,000
1,500,000

-1,000,000
0
500,000

Q1 2019
Q4 2018
Q2 2019
Q1 2019
Q3 2019
Q2 2019
Q4 2019
Q3 2019
Q1 2020
Charlotte office market indicators

Q4 2019
Direct

Q2 2020 Q1 2020
Q3 2020 Q2 2020

Q4 2020 Q3 2020
Vacancy

Q1 2021 Q4 2020
Q1 2021
Q2 2021
Q2 2021
Sublet

Source: AVANT by Avison Young, CoStar

Q3 2021
Net absorption (sf)

Q3 2021
Q4 2021
Q4 2021
Q1 2022
Q1 2022
Q2 2022 Q2 2022
Q3 2022 Q3 2022
3.8%
15.8%
-734,954

Q4 2022 Q4 2022
$15
$20
$25
$30
$35
$40

$100
$200
$300
$400

$0

Q4 2018
Q4 2018
Q1 2019 Q1 2019

Q2 2019 Q2 2019

Q3 2019 Q3 2019
Q4 2019 Q4 2019
Q1 2020 Q1 2020
Q2 2020
Q2 2020
Q3 2020
Q3 2020
12mo sale volume

Q4 2020
Q4 2020
Q1 2021
Q1 2021
Q2 2021
Q3 2021 Q2 2021

Q4 2021 Q3 2021

Q1 2022 Q4 2021
Investment sales (TTM)

$341
12mo avg $/sf

Q2 2022
Direct asking rents (psf/FS)

Q1 2022
Q3 2022 Q2 2022
Q4 2022
Q3 2022
$34.88

Q4 2022
0B
1B
2B
3B
4B
Office market activity
Recent leasing activity
Tenant Name Property Sign Date Size (sf) Transaction Type Lease Type Submarket

Confidential 11215 N Community House Rd Oct 2022 31,085 New Sublease South/485

Positec 929 Jay St Dec 2022 29,033 New Direct North

Confidential 1801 Graham St Dec 2022 25,018 New Direct Plaza Midwood/Noda

Trinity Partners 650 S Tryon St Oct 2022 23,854 New Sublease CBD

Confidential 2101 Thrift Rd Dec 2022 20,000 New Sublease Airport

Recent sales activity

Buyer Property Sale Date Sale Price Sale Price (psf) Submarket Seller

Albemarle US Inc 6800 Solectron Dr Dec 2022 $70,290,409 $160.43 University Shorenstein Properties LLC

Griffin Partners Inc *6525 Carnegie Blvd Oct 2022 $35,060,552 $304.06 SouthPark Intercontinental Real Estate Corp

MRP Realty 526 S Church St Dec 2022 $35,000,000 $66.93 CBD Duke Energy

Millennium Venture Capital AG 401 S College St Dec 2022 $24,000,000 $195.81 CBD Duke Energy

Griffin Partners Inc *1901 Roxborough Rd Oct 2022 $15,789,448 $246.28 SouthPark Intercontinental Real Estate Corp

*Part of a portfolio

Notable Development
Property Submarket Delivery Date Total (sf) % Preleased Asking Rent Developer

Duke Energy Tower CBD Aug 2023 1,000,000 99% $52 Childress Klein

2405 Governor Hunt Rd University Mar 2023 770,000 0% N/A Rafco Properties

Legacy Union – Phase IV CBD Sep 2024 410,880 98% N/A Lincoln Harris

The Thread South Carolina Dec 2023 400,000 0% N/A The Keith Corporation

page 4 Charlotte office insights | Q4 2022 Source: AVANT by Avison Young, CoStar
Office market stats by submarket
Direct & Sublet Vacancy Net Absorption Average Asking Rent
SF Under
By Submarket Inventory (sf) Q3 New Leases
Construction
Class A Class B Total % 3Q22 TTM Class A Class B

CBD 21,047,762 14.50% 16.20% 14.70% 85,128 (103,291) (520,327) 1,504,000 $ 36.94 $ 31.63

Midtown/South End 4,831,543 13.20% 10.70% 12.20% 85,350 132,097 491,943 733,120 $ 42.11 $ 38.27

Plaza Midwood/Noda 839,306 73.10% 7.30% 58.90% 69,994 21,673 (34,086) 439,972 $ 39.44 $ 33.01

Urban Subtotal 26,718,611 16.30% 14.90% 17.60% 240,472 (1,518) (62,470) 2,677,092 $ 37.50 $ 33.06

Airport 9,118,870 18.20% 34.10% 23.70% 221,548 (133,261) 84,509 190,000 $ 27.43 $ 25.07

East Charlotte 1,004,590 0.00% 20.10% 18.60% 8,479 (4,779) (3,148) - - $ 17.77

North Charlotte 2,202,295 19.70% 10.50% 16.60% 87,071 59,794 52,631 491,470 $ 29.57 $ 27.73

Park Road 712,791 21.30% 14.00% 18.60% 92,727 (111,081) (87,048) - $ 36.75 $ 34.78

South/485 5,499,938 26.40% 16.00% 25.50% 193,627 (183,243) (270,596) - $ 36.10 $ 40.40

South Charlotte 923,386 20.30% 10.00% 15.00% 41,795 9,515 15,643 - $ 28.47 $ 27.04

Matthews 677,741 0.00% 8.30% 10.30% 7,684 (44,185) 43,905 - $ 28.00 $ 21.40

SouthPark 4,295,177 17.70% 12.40% 16.00% 78,566 (114,252) (66,027) - $ 38.91 $ 32.06

University 4,539,533 47.70% 20.10% 29.90% 32,083 (399,122) (357,772) 800,000 $ 27.89 $ 29.26

South Carolina 2,503,300 6.20% 33.50% 19.80% 63,399 63,399 (158,562) - $ 27.41 $ 25.00

Suburban Subtotal 31,477,621 23.50% 21.90% 22.60% 826,979 (857,215) (746,465) 1,481,470 $ 32.39 $ 28.44

Market Total 58,196,232 18.70% 20.10% 19.60% 1,067,451 (858,733) (808,935) 4,158,562 $ 34.88 $ 28.77

page 5 Charlotte office insights | Q4 2022 Source: AVANT by Avison Young, CoStar
Office market Sublease vacancy rate Direct vacancy rate

vacancy rate 25%

Record high Charlotte office

19.6%
vacancy for direct, sublease and
total percentages
20%

Record high Charlotte office

vacancy rate as of Q4 2022. 15%

The Q4 2022 vacancy rate is a record high in terms 10%

of sublease, direct and total percentages. When the
ratio of vacant sublease-to-total vacant space
reaches 18%, it is historically accompanied by a
5%
minimum 5% rent decline. That ratio stands at
19.4%.

0%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022
page 6 Charlotte office insights | Q4 2022 Source: CoStar
Class A base $36
Base rent FS psf
$34.88
rental rates $34

+9.3% $32

$30
Change in Class A base
rental rates, trailing $28
twelve months.
$26
Net effective rents increased by 9.3% from year-end
2021, signaling that demand has risen as office
employees return to work and tenants that
$24
postponed their real estate decisions re-enter the
market. Expect rent growth to level out in order to
offset vacancies. $22 $20.55

$20

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022
Note: Excludes subleases, expansions and renewals.
page 7 Charlotte office insights | Q4 2022 Source: AVANT by Avison Young
Office-using job gains Charlotte Metropolitan Statistical Area
February 2020 to November 2022
and losses
Financial Activies 12.7%

6.8% Transportation, Warehousing & Utilities

Professional & Business Services 9.3%

12.3%

Change in office-using
employment since pre- Education & Health 8.0%
pandemic levels.
Mining, Lodging & Construction 7.4%
Charlotte MSA job gains have increased by 6.8%
since February 2022, with the financial industry
Other Services 5.4%
increasing more than any other job sector at 12.7%.
Given net positive job gains across all industries in
the Charlotte MSA, it’s safe to say that the area has Information 2.0%
eclipsed pre-pandemic levels in terms of
employment and business activities. Hospitality 1.9%

Manufacturing 0.9%

page 8 Charlotte office insights | Q4 2022 Source: Bureau of Labor Statistics

Office insights
glossary of terms
Demand
– Leasing activity: total square footage of relocations,
renewals, expansions and subleases expressed when
the leases are signed, not when tenants take physical
occupancy of the space
– Absorption: period-over-period change in occupied
square footage
Supply
– Direct vacancy rate: space operated by landlords that
is ready for immediate occupancy
– Sublease vacancy rate: space operated by
sublandlords that is ready for immediate occupancy
– Total vacancy rate: sum of direct vacancy rate and
sublease vacancy rate
– Availability rate: space that is vacant plus space that
will become vacant over an indefinite time horizon,
including spaces that are occupied by vacating tenants
and under-construction properties
page 9 Charlotte office insights | Q4 2022
Office rents and concessions
– Asking rents: pricing guidance provided by landlords to
tenants for available space expressed as full service (FS)
– Base rents: fair market value of market-level lease
pricing based on representative executed leases,
expressed as full service (FS)
– Free rent period: months of free rent that are typically
provided upfront by landlords to tenants as a
concession to offset the total cost of a lease and/or the
construction timeline of an office suite
– Tenant improvement allowance: an allowance
expressed in dollars per square foot provided from
landlords to tenants to offset build-out, engineering,
space planning and related permit costs
– Net effective rent: base rents discounted by the dollar
values of tenant improvement allowance and free rent
concessions expressed as full service (FS)
Capital markets
– Investment volume: office sales dollars
expressed when the transactions close and based
on inventory thresholds; partial-interest sale dollar
amounts are not grossed-up to reflect the 100%
value of the sale
– Asset pricing: unweighted average per-square-
foot asset pricing of market-level closed sales
– Cap rate: net operating income divided by sale
price; this measurement of market-level
investment returns is calculated as an unweighted
average based on closed investment sales
Vitality Index
– Visitor volumes: based on extrapolated,
anonymized cell phone pings provided by Orbital
Insight at custom, geofenced locations, the Vitality
Index tracks visitor volumes at representative
areas of interest across markets and property
types
Explore our latest
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Putting people and the planet first
There is a vital role for our sector to create healthy,
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centers of prosperity for their citizens, and built
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Global ESG Report
page 10 Charlotte office insights | Q4 2022
The return of people and places
Companies across North America continue to
grapple with uncertainty. What will the future of
work look like? Are downtowns regaining their
pre-pandemic vitality? How will societal, cultural
and environmental shifts shape the next normal?
The Vitality Index
Tracking U.S. employment trends
Rising layoffs and declining job postings are also
indicating that the economy is becoming distressed.
Employment data and industries are analyzed across
cycles for a real-time and historical look at economic
conditions.
U.S. Employment Overview
For more market insights and
information visit avisonyoung.com

Nick Claudio Lem Doss

Senior Vice President Associate
+ 1 704 512 0231 +1 804 658 6138
nick.claudio@avisonyoung.com lem.doss@avisonyoung.com

Zach Simpson Richard Toal

Vice President Research
+1 704 315 5091 +1 704 891 9382
zach.simpson@avisonyoung.com rich.toal@avisonyoung.com

© 2023 Avison Young. All rights reserved. E. & O.E.: The information contained herein was obtained from
page which Charlotte
sources11 officeand,
we deem reliable insights | Q4 2022
while thought to be correct, is not guaranteed by Avison Young.