M A R K E T B E AT

CHARLOTTE
Office Q1 2023

YoY 12-Mo. ECONOMIC OVERVIEW

Chg Forecast
Despite nationwide layoffs in tech and banking turmoil both domestic and abroad, the Charlotte region has remained relatively
unaffected due to the presence of stable banking institutions buoying against uncertainty in the markets. Non-farm employment
16.5% continued to expand, increasing by 3.3% year-over-year (YOY) with growth in the information, financial activities and professional
Vacancy Rate
and business services labor pools. The unemployment rate moved above the national average to 3.6% in Q1, a figure that has
remained stable YOY but is expected to grow in the coming year. Strong net in-migration and low business costs will sustain the
-97.9K region during the looming recession and inflationary pressures.
Q1 Net Absorption, SF
RENTAL RATES
$33.82 Rental rates in the Charlotte region have seen tremendous growth over the past eight years having risen from a direct rate of
$22.02 per square foot (psf) in Q1 2015 to $33.82 psf in Q1 2023, a 53.6% increase over that time. Since 2015, new Class A
Asking Rent, PSF
(Direct, All Property Classes) product has brought highly desired space to market while older Class A and even Class B spaces were able to capitalize on the
success of nearby new construction, drafting higher rates off the new product. Despite a 4.1% increase YOY in Q1, the growth
rate has started to slow for office product, with the quarter-over-quarter (QOQ) increase reported at 0.7%, the sixth consecutive
quarter of decreasing growth rates due to a lack of vacant new supply delivered since 2022 and a rise in sublease space offering
ECONOMIC INDICATORS discounted rates for tenants. Rates should continue to increase over the near term with nearly 1.6 million square feet (msf)
Q1 2023 expected to deliver in 2023 and another 864,000 sf set for 2024 with a direct average rental rate of $49.61 psf; rate increases
12-Mo.
should then subside as limited new office product is on the horizon following the completion of current construction projects. The
YoY
Chg Forecast highest rates continued to be found in the Midtown/South End submarket where Class A direct rates were quoted at $44.72 psf in
1.3M Q1, while the Central Business District (CBD)/Uptown averaged $39.10 psf direct for Class A product.
Charlotte CONSTRUCTION
Employment The Charlotte office market started 2023 with the delivery of two new office buildings that totaled 156,828 square feet (sf), both in
the Midtown/South End submarket. LoSo Station, a four-building development by Beacon Partners completed construction on
3.6% Building 3 for 80,091 sf, of which 22.7% was pre-leased. 23Twenty, a 76,737-sf adaptive reuse creative office project in the Quarter
South End, delivered fully available. Substantial renovations also completed on 227 Southside, a creative office mixed-use project
Charlotte
Unemployment Rate in the LoSo area of Midtown/South End; the 53,315-sf was 63.8% pre-leased to JE Dunn Construction and Protagonist Brewing. Of
the nearly 2.5 msf under construction, 1.6 msf is expected to deliver this year which will keep vacancy elevated near term as pre-
leasing velocity has slowed.
3.5%
U.S. SPACE DEMAND / DELIVERIES DIRECT VACANCY & ASKING RENT
Unemployment Rate 4.0
$36.00 18%
Source: BLS 3.0 16%
$32.00 14%
2.0
12%
$28.00
MSF

1.0 10%
$24.00 8%
0.0 6%
-1.0 $20.00 4%
2019 2020 2021 2022 Q1 2023 2019 2020 2021 2022 2023
Direct Net Absorption Construction Completions Dir Avg Rental Rate Dir Vacancy Rate
 M A R K E T B E AT

CHARLOTTE
Office Q1 2023
SUPPLY AND ABSORPTION ASKING RENT COMPARISON
The direct vacancy rate in Metro Charlotte increased for the third consecutive quarter to 16.5%, a 50 basis points $40
(bps) increase QOQ. The overall rate rose above the 20% mark as well, with sublease vacancy climbing 30 bps to
3.7% QOQ. Sublease opportunities, which now total over 2 msf, represent 18.2% of all vacant space in the market, $35

as tenants continue to reevaluate office space needs. Of the 13 Charlotte submarkets, 12 experienced increases to $30

$ PSF
overall vacancy with the most pronounced increases in the Matthews (200 bps), South Charlotte (180 bps) and
SouthPark (170 bps) submarkets. Additionally, the South/485/Ballanytyne submarket, one of the more highly $25

concentrated suburban submarkets, has seen a vast increase in vacancy over the last two quarters, swelling by 420 $20
bps over that time. Midtown/South End, a hotbed of office, retail and multi-family development, also saw vacancy
rise this quarter three ground-up construction projects delivering more than 145,000 sf of new vacant space in Q1. $15
2018 2019 2020 2021 2022 2023
Despite these vacancy increases, direct vacancy in CBD/Uptown remained relatively low with 13.8%, 270 bps below Class A Class B
the metro Charlotte rate and 420 bps below the suburban rate. Absorption figures remained in the red in Q1 with -
97,857 sf of direct occupancy losses reported. The South/485/Ballantyne submarket returned more than 77,500 sf of
NEW SUPPLY
space this quarter with multiple buildings becoming fully vacant over Q4 2022 and Q1 2023. Unsurprisingly,
Midtown/South End experienced strong absorption at the start of 2023 with more than 107,500 sf of positive
absorption in Q1. Major tenant move-ins in this submarket include Northeastern University at the Line (52,957 sf), 4 New Supply
Flexicare at Vantage South End – East Tower (27,509 sf) and McAdams at 2100 S Tryon (27,509 sf). Under Construction
5-yr. Avg - 1.7 MSF
DEMAND 3

New leasing activity rebounded modestly after a Q4 slowdown with more than 418,000 sf of deals signed, a 10.8%
QOQ increases. New leasing volume continues to be highly concentrated in the suburbs with 83.1% of all new

MSF
2
leases occurring in non-CBD markets. However, submarkets in or near the city center - CBD/Uptown, Plaza
Midwood/NoDa, FreeMoreWest and Midtown/South – also boasted healthy activity with more than 172,000 sf of new 1
leasing as tenants were drawn to their proximity to the city center and strong amenity base. 41.1%. Tenant demand
continued to be heavily favored towards Class A product which accounted for a notable 86.2% of leased space this
0
quarter. In a notable trend seen in recent quarters, the average square footage leased shrank, with an average 2019 2020 2021 2022 2023 2024P
lease size of 4,748 sf in Q1, a 43.7% reduction since Q1 2022. Of the 100 new leases signed this quarter, only three
were above 20,000 sf. As tenants continue to right-size their space and move to more compact floor plans during
this period of hybrid work models, expect this average to remain lower. SUBMARKET COMPARISON
22
20
Occupied Vacant 18
16
14

MSF
OUTLOOK 12
10
8
• Rental rates will continue to rise in the near term with new deliveries bringing higher priced vacant 6
4
space to market. However, expect the growth to remain slowed as older generation space start to 2
reevaluate asking rates. 0

• Vacancy will remain elevated but stable with tenant move-ins balancing out with new construction
vacancies and additional supply expected to come to market.
M A R K E T B E AT

CHARLOTTE
Office Q1 2023
MARKET STATISTICS
AVG DIRECT
DIRECT OVERALL CURRENT QTR YTD DIRECT NET YTD DIRECT AVG
INVENTORY DIRECT SUBLET YTD LEASING UNDER ASKING
SUBMARKET VACANCY VACANCY DIRECT NET ABSORPTION DELIVERIES ASKING RENT
(SF) VACANT (SF) VACANT (SF) ACTIVITY (SF) CNSTR (SF) RENT (ALL
RATE RATE ABSORPTION (SF) (SF) (CLASS A)*
CLASSES)*

CBD/UPTOWN TOTALS 19,403,982 2,671,222 13.8% 530,415 16.5% -20,149 -20,149 70,583 504,000 0 $37.82 $39.10

Airport 10,151,682 1,400,421 13.8% 731,077 21.0% -22,507 -22,507 55,304 0 0 $25.62 $27.35

East Charlotte 816,429 149,046 18.3% 0 18.3% 4,559 4,559 1,704 0 0 $17.84 -

Matthews 1,032,955 103,901 10.1% 31,475 13.1% 0 0 0 0 0 $21.76 $23.00

Midtown / South End 5,210,806 885,063 17.0% 42,069 17.8% 107,896 107,896 66,185 634,722 156,828 $43.11 $44.72

Northeast / I-77 1,871,932 226,554 12.1% 95,656 17.2% -174 -174 30,762 0 0 $28.79 $29.52

FreeMoreWest 507,500 236,327 46.6% 9,950 48.5% 0 0 7,645 200,000 0 $39.01 $39.51

Park Road 506,133 78,739 15.6% 28,878 21.3% -3,979 -3,979 6,616 0 0 $34.67 $35.00

Plaza Midwood / NoDa 931,428 338,329 36.3% 1,824 36.5% -13,596 -13,596 27,616 341,157 0 $37.67 $37.47

South Charlotte 1,167,875 162,118 13.9% 4,836 14.3% -20,953 -20,953 18,342 0 0 $27.85 $28.84

South / 485 / Ballantyne 6,412,328 1,425,694 22.2% 148,583 24.6% -79,773 -79,773 36,556 0 0 $36.65 $36.79

SouthPark 4,304,628 670,085 15.6% 165,739 19.4% -52,087 -52,087 51,954 0 0 $36.06 $38.11

University 4,429,283 1,040,290 23.5% 300,841 30.3% 2,906 2,906 44,890 770,000 0 $26.54 $27.70

SUBURBAN TOTALS 37,342,979 6,716,567 18.0% 1,560,928 22.2% -77,708 -77,708 347,574 1,945,879 156,828 $32.21 $34.12
Class A 40,625,195 6,615,240 13.5% 1,190,106 19.2% 4,313 4,313 360,542 2,449,879 156,828 $36.17 $36.17

Class B 16,121,766 2,772,549 18.2% 901,237 22.8% -102,170 -102,170 57,615 0 0 $28.45 -

CHARLOTTE TOTALS 56,746,961 9,387,789 16.5% 2,091,343 20.2% -97,857 -97,857 418,157 2,449,879 156,828 $33.82 $36.17

*Rental rates reflect full service asking

KEY LEASE TRANSACTIONS Q1 2023
PROPERTY SUBMARKET TENANT RSF TYPE

Gama Goat – 1081 N Graham St Plaza Midwood / NoDa Bolton & Menk 24,666 New Lease
The Line Midtown / South End ManPowerGroup, Inc. 23,610 New Lease
227 Southside Midtown / South End JE Dunn Construction 18,059 Pre-Lease
Three Resource Square University AmeriFleet 14,854 Sublease
thExchange Airport Enviro-Master Services 13,788 Renewal
M A R K E T B E AT

CHARLOTTE
Office Q1 2023
OFFICE SUBMARKETS
JOHN PETER PRICE
Research Manager, Carolinas
Tel: +1 704 335 4433
jp.price@cushwake.com

NICK DIPAOLA
Research Analyst, Charlotte
Tel: +1 704 916 4445
nicholas.dipaola@cushwake.com

A CUSHMAN & WAKEFIELD

RESEARCH PUBLICATION
Cushman & Wakefield (NYSE: CWK) is a leading global real estate
services firm that delivers exceptional value for real estate occupiers
and owners. Cushman & Wakefield is among the largest real estate
services firms with approximately 52,000 employees in over 400
offices and approximately 60 countries. In 2022, the firm had revenue
of $10.1 billion across core services of property, facilities and project
management, leasing, capital markets, and valuation and other
services. To learn more, visit www.cushmanwakefield.com or follow
@CushWake on Twitter.

©2023 Cushman & Wakefield. All rights reserved. The information

contained within this report is gathered from multiple sources
believed to be reliable. The information may contain errors or
omissions and is presented without any warranty or representations
as to its accuracy.

cushmanwakefield.com