With growth occurring in all major Southeastern cities, the market's future can look ahead to a bright future as it enters the 21st Century.
To go with its hot, sizzling summer, the Southeast has also had a hot, sizzling year economically. The goodis, this is not only happening in Southeastern cities such as Atlanta or Miami, but in cities like Birmingham, Ala., and Charlotte, N.C. Heavy migration continues to occur, as well as job opportunities and residential development.
The Southeast leads other regions across the nation in economic growth, absorption and demand. Each segment of the commercial real estate industry - office, industrial and retail - show continued progress with little indication of slowing down.
However, in many parts of the country, the questions being asked by everyone from developers to lenders is, "How bad will the commercial real estate slowdown be?" In Florida, people are asking a different question: "What slowdown?"
Construction of office, retail, hotel and apartment properties is humming all around the state. With Florida's population and job growth continuing to outpace most of the nation, absorption of new commercial space continues to be healthy.
"We may be seeing a very subtle slowdown, perhaps a month or two delay in the sale process," says Ted O'Connell, president of the Tampa, Fla., office for Advantis, a division of Jacksonville, Fla.-based St. Joe Co.
Statewide, the office vacancy rate is a healthy 13.4%, according to New York-based Cushman & Wakefield. And even though there is 6 million sq. ft. of office space being built in Florida, experts expect absorption to be as much as 8 million sq. ft. this year.
"We've seen the demand grow steadily, which has supported this building boom that started around 1995," says Larry Richey, senior managing director for the Florida office of Cushman & Wakefield.
With Florida's population growing, employers continue to look at cities such as Tampa and Orlando as places where they can find workers. Florida has become known as a place for customer service centers, though now economic development recruiters are working to bring in more high-paying, technologically sophisticated jobs.
Despite all the good news, there are some trouble spots as Florida figures out how to weather what could be a significant U.S. slowdown. Two recent reports point to Orlando as one of the most overbuilt hotel markets in the country. Retail growth around the state has been stunted by the struggles of such chains as Service Merchandise. While real estate executives talk confidently of Florida's ability to weather a slowdown, that optimism could fade quickly if lenders get skittish.
Still, Florida real estate executives remain confident. "Nationally, lenders have reported a 50% decline in projects on the drawing board, but we are just not seeing that in Florida," says Beth Azor, president of Miami-based Terranova. "If there was a slowdown, we'd have seen an impact on the collection of rentals from tenants, late payments and delinquencies."
What follows is a look at the state's three largest markets and how they're faring.
Tampa Bay, Fla. Developers in the Tampa Bay area are nothing but bullish on the future. Three movie/retail/restaurant complexes will open this winter - two in Tampa and one in St. Petersburg - while developers are going forward with plans for three ambitious new office projects in Tampa.
"We are very confident about the future," says Josephine Vitale, who's planning a 2 million sq. ft. development called Tampa Bay 1 in Tampa's Westshore district for New York-based Bromley Development Co. "If we didn't, we wouldn't be here, because you have to look at least two or three years out to plan a project."
Tampa Bay 1 will include two office buildings, a four-star luxury hotel and retail shops. But it may face stiff competition around the city. In Westshore, Crescent Resources Inc. is planning to start a second building in its Corporate Center at International Plaza project. Downtown, locally based Hogan Group is proposing the largest office project ever built in the city's downtown.
Heritage Park will have three office towers, the first a 40-story structure called Heritage Tower that will draw its architectural inspiration from such 1930's New York towers as the Empire State Building and Rockefeller Center. Hogan hopes to open the first of the project's towers in 2003, but preleasing could be tough. Tampa is still recovering from an overbuilding spree in the early-1990s.
Downtown Tampa's office vacancy rate is 15%, and many tenants are in the process of looking for new space. In the early-1990s, many buildings signed tenants to relatively cheap long-term. Now, many of those contracts are running out, and some tenants are realizing that their present digs may be too pricey. Even the Greater Tampa Chamber of Commerce is looking for space as its lease at SunTrust Financial Centre nears an end.
Overall, the office market continues to be very healthy. Pinellas County's vacancy rate is about 15%, but both Tampa and St. Petersburg's markets are doing a good job of absorbing new space, with year-to-date absorption in Tampa at 990,000 sq. ft.
Rental rates have been rising a bit - the average rental rate in Tampa is now $17.73 per square foot, according to Cushman & Wakefield, while Pinellas' average rate is now up to $16.52. Class-A space is in the low- to mid-$20s. "The rental rates are now approaching the rates that would justify the cost of new construction," says Cushman's Richey.
In retail, the big question is how the new movie/restaurant/retail developments will fare. St. Petersburg-based Sembler Co. is opening BayWalk in downtown St. Petersburg and Centro Ybor in the Ybor City neighborhood of Tampa. The Hogan Group is building the Channelside project, just a mile from Ybor on the Garrison Channel in downtown Tampa. While the BayWalk project offers the first new movie theater in years in southern Pinellas County, some experts wonder if both Centro Ybor and Channelside can thrive.
Centro will attempt to attract older, wealthier patrons to an area known as a weekend party capital for twentysomethings. Channelside, meanwhile, will try to bring visitors to an out-of-the-way corner of downtown Tampa, though that has been changing with the addition of the Florida Aquarium, a new cruise ship terminal and the Ice Palace Arena.
One beneficiary of the Ice Palace's success is the new Tampa Marriott Waterside hotel, a downtown facility that's off to a promising start. Unlike other Southeastern markets, Tampa Bay doesn't seem to have an overbuilding problem with hotels, with at least five other projects in the works around the area.
The industrial market is also thriving. Facilities that can be used as warehouse or office space seem well-suited for many locations, especially near the interstates. Vacancy rates remain low - around 6% in Tampa and 5% in St. Petersburg - while another 1 million sq. ft. of space is under construction.
The hottest part of the area continues to be the east side of Tampa along the Interstate 75 corridor. Among the new projects is an addition to Silo Bend developed by Malvern, Pa.-based Liberty Property Trust and an addition to Fairfield Distribution Center by Indianapolis-based Duke-Weeks Realty Corp. As land runs out, look for such facilities to start moving into southern Hillsborough County.
Tampa Bay's population growth continues to fuel the construction of new apartment complexes, though the pace of construction has slowed since last year, when 2,728 units were built around the Tampa Bay area. This year that number is expected to be 1,849, but demand is still strong, says Michael Slater of the Tampa apartment consulting firm Triad Research. That was born out by the reaction of Camden Development Inc. after its Park at Ybor City complex burned down last May in one of the most spectacular fires in Tampa history.
The 454-unit development went up in flames while much of it was in the framing stage. Soon after the fire, Camden officials made it known that they would rebuild, signaling their confidence that demand for the project would stay strong.
Orlando Over the past 10 years, "Orlando has grown up," says Cushman & Wakefield's Richey. "It has evolved into a respected business and employment community, not just Mickey Mouse and tourism."
The best way to measure that change is downtown, where three new office towers are adding almost 1 million sq. ft. of space to the market. CNL Center opened last November with 354,000 sq. ft. of space; Capital Plaza II opened in December with 306,675 sq. ft.; and Lincoln Plaza opens this year with another 246,117 sq. ft. CNL Center is about 80% leased, while Capital Plaza II is 42% full and Lincoln Plaza is approximately 45% full.
The office market in Orlando is healthy, with absorption this year of about 1 million sq. ft., with about 600,000 sq. ft. of space under construction. Two other hot spots are the Central Florida Research Park area, where Crescent Resources is building 122,000 sq. ft. Two Resource Square, and the Southwest area, where Crescent is building the 118,000 sq. ft. Westwood Center III.
Orlando's office vacancy rate has gone up a bit; it was 10.2% in the second quarter, compared with 8.1% a year earlier. That is still low considering the amount of space that has become available. If that rate stays low as expected, look for rental rates to continue to increase slightly ahead of the pace of inflation. The average rental rate for the Orlando area is $19.89 a square foot, according to Cushman & Wakefield, while Class-A space downtown is averaging $24.25.
Another sign of the vigorous downtown is the hotel and apartment activity. A Courtyard by Marriott recently opened on the north end of downtown, while an Embassy Suites is slated for development adjacent to Capital Plaza II.
The problem, if there is one, is not about to go away in Orlando. The city was first in Bears Stearns' rankings of Florida cities based on hotel rooms under construction or in the early planning stages as of first-quarter 2000. Orlando had 22,129 rooms; Miami was a distant second with 6,666, followed by Fort Lauderdale with 5,830; Jacksonville with 4,581; and Tampa Bay with 4,458.
There are similar concerns about overbuilding in the apartment market. For instance, two projects are under development downtown, and two more are planned, for a total of 1,300 units. Another possible warning sign: The average occupancy rate in Orlando has been slipping slightly from a high of 95.4% in September 1998, though it's still in the low 90s.
Apartment experts have been worried for months about possible overbuilding in the Orlando market. However, Darryl LeClair, chief executive of St. Petersburg-based Echelon International, says, "If you are in the right parts of town, you will know the demand is going to be there." Echelon is building complexes in both Atlanta and downtown Orlando, part of a drive to take the company's apartment development business national.
The area's strong economy continues to spark more retail development, says Thearon Scurlock, marketing director for Birmingham, Ala.-based Colonial Properties Trust's state operations. "A lot of small centers are simply opening with one or two anchors, filling in the middle after they are open," he says.
The drivers of this growth are easy to name: Eckerd, Walgreens and CVS are opening freestanding drug stores all over the state. Lowe's and Home Depot continue to open stores near each other. And Wal-Mart and Target continue their growth, while grocery chains led by Publix Supermarkets continue to open larger, fancier stores catering to those who want a classy deli and more to-go items.
Meanwhile, the area's regional malls continue to grow, with The Florida Mall expanding and the new Forbes Millennia Mall set to add 1.4 million sq. ft. of upscale space.
As for the industrial market, the overall vacancy rate is roughly 7%, with much of the new 1.1 million sq. ft. of construction centering around the airport, Regency Industrial Park and Orlando Central Park areas. Orlando has two factors to thank for its success: a healthy economy and the presence of Interstate 4.
South Florida Anyone who wonders how South Florida commercial real estate is faring need only to drive down Brickell Avenue in downtown Miami.
Three luxury hotels are going up along the thoroughfare: a 325-room Mandarin Oriental Hotel, a 300-room JW Marriott Hotel and a 295-room Four Seasons Hotel.
The construction points to the continuing success of the South Florida economy. In the hotel market, the average daily room rate in Miami last year was $117, up a healthy 8% from the previous year, and the average occupancy rate was about 73%. As companies move their Latin American headquarters to Miami, they bring more high-paying jobs and the need for more space.
"If you have a well thought-out product that has demonstrated demand you can put in some equity to assume some risk," says Jim Fried, senior vice president of Boca Raton, Fla.-based Tri-Stone Cos., a mortgage and investment brokerage.
Consider the office vacancy rates, one of the most common indicators of a market's health. Miami's vacancy rate was 11.3% in the second quarter, while Broward County's was 13.1%. Additionally, there was about 2 million sq. ft. of space under construction in Miami and another 1.85 million sq. ft. going up in Broward.
Downtown Miami is a hotspot, with the 522,843 sq.ft. Barclay's Financial Center going up and the Four Seasons Tower, a 70-story mixed-use tower with 200,000 sq. ft. of office space, a Four Seasons hotel and residential units that are expected to be completed in 2003. The Class-A downtown market has a vacancy rate of 7%, with average rental rates of $30.48.
Other hotbeds of office activity are the South Beach area in Miami Beach, where high-tech companies are diversifying an area previously known only for night-life. The Westin area of Fort Lauderdale, and Coral Gables are adding 600,000 sq. ft. to a market that had 4 million sq. ft. before.
Healthy absorption (Miami had absorbed 728,615 sq. ft. of office space as of the second quarter, while Broward County had absorbed 744,252 sq. ft.) is alleviating most concerns about overbuilding.
"Look at the area around the Miami airport," says Paul White, president of locally based Allen Morris Co. "There was about 700,000 sq. ft. of product that hit the market the past 18 months, but it seems like the market is going to handle it, though there's just a handful of new projects in that area."
Though some residents continue to leave Miami-Dade County to move north to Broward, "That doesn't necessarily mean something bad for Miami," says White. "It just means that Fort Lauderdale is more of a traditional American city, while Miami is more of an international city."
Retail growth is keeping pace with the area's hot economy. The Wellington area is especially hot, with a new mall under development, "But there will be some weeding out over there," says Azor of Terranova. "There are 14 projects on the drawing boards in Wellington, but the market can support only four or five."
The retail market is growing at both ends: more upscale stores are going up, such as the new Dolphin Mall; and the lower-scale "dollar stores" are making a comeback. There is a lot of concern about retail that depends on movie theaters to generate traffic.
"The movie industry is the weakest industry involved in real estate right now," says Azor. "There hasn't been much discipline, and in some places, there are too many theaters."
In development, the cost of land is an overarching concern around South Florida, especially for multifamily. The Miami-Dade County area remains strong, with apartment vacancy rates of less than 5% for the past five years, while rental rates have increased by an average of 3% a year since 1995.
"Doing a deal for new apartments or condos in Miami is almost impossible," says Tri-Stone Co.'s Fried. "Action in that market is going north of Miami, because downtown is too expensive."
Much of the residential action is in the redevelopment arena, such as the so-called "design district" along Biscayne Boulevard in north Miami, where old buildings are being converted to lower-end multifamily.
South Florida's industrial market continues to be healthy, with a vacancy rate of 7.2% in Miami as of the second quarter, according to Cushman & Wakefield, and a 6.6% vacancy rate in Broward.
As of the second quarter, Miami had absorbed 405,675 sq. ft. of space, with approximately 1.5 million sq. ft. under construction. In Broward, the market had absorbed 947,519 sq. ft., while 1.9 million sq. ft. was under construction.
Not surprisingly, one of the hottest areas for industrial activity is around Miami's airport, where trade with Latin America, Europe and the Caribbean continues to grow. So far, Latin America's economic problems have had little impact on the business flowing through Miami, so the outlook for continued growth in industrial space seems bright.
Miami has quickly become a city that offers companies looking to relocate the whole package. Whether the company needs office, retail or industrial property, Miami can say it has whatever is needed.
Midtown Atlanta Atlanta's development community has headed back toward its center after decades of rapid expansion. Dubbed the fastest-growing human settlement in history by Time Magazine, Atlanta truly is racing to meet demand. Midtown is at the heart of the city's three intown submarkets. Outpacing Atlanta's resurgent CBD and high-rent Buckhead submarket, Midtown is the city's greatest hope for creating a seven-day, 24-hour around-the-clock, live/work/and play atmosphere.
"If I was going to bet on one submarket [in Atlanta], Midtown would be it," says Gerald Lambert, senior director in the Atlanta office of New York-based Cushman & Wakefield.
A number of local developers apparently share Lambert's enthusiasm. Dallas-based Trammell Crow Co. and locally based Pope & Land Enterprises Inc. are well under way with new 500,000 sq. ft. office towers on 14th Street; Atlanta's Holder Properties (with Atlanta residential developer Post Properties), Dallas-based Lincoln Property Co. and Scott & Associates of Alpharetta, have all announced new Midtown projects in the past few months; and established Midtown players such as Atlanta's Winter Properties and Barry Real Estate Cos. are contemplating their next moves.
The push intown began back in 1997 when Atlanta-based developer Dewberry Capital Corp. bought a three-acre parcel on Midtown's northern edge to begin a seven-story, 165,000 sq. ft. building at its Peachtree Pointe project.
In fewer than three years, according to The Atlanta Journal-Constitution, the boom has mushroomed to include announced plans for more than 5.5 million sq. ft. of office space, 5,600 new residential units and at least one hotel renovation.
Trammell Crow is scheduled to complete The Proscenium next March. The 23-story, 527,000 sq. ft. office tower, located at the corner of 14th and Peachtree streets, is attracting strong leasing interest, according to Amy Smith Cate, director of leasing for The Proscenium.
"In addition to tech firms, professional service firms are growing," says Cate. "New space in the market is serving to create expansion room for others that had considered moving."
Three blocks down, at 14th and West Peachtree streets, Pope & Land Enterprises' $95 million Atlantic Center Plaza is under way. The building, scheduled to be delivered in October 2001, has a reported 200,000 sq. ft. commitment from law firm Alston & Bird. The building should capitalize on the corporate and professional service firm's growth that neighbors to the east expect.
Away from the new and existing Class-A space on 14th Street, several developers are hoping to capitalize on Midtown's reputation as Atlanta's high-tech office mecca.
To the south, Holder Properties has teamed up with Post Properties to create Millennium in Midtown, a $125 million mixed-use project that will contain 400,000 sq. ft. of office space and possibly 300 residential units. Located at 10th and West Peachtree streets, Millennium will also feature entrances to the Midtown MARTA rapid transit station.
"It's a more formal building that will appeal to a mid-size law firm," says Clark Gore, Holder's executive vice president.
Further south, Lincoln Property Co. is hoping to capitalize on its success at 730 Midtown, a converted Veterans Affairs building. Lincoln plans to build a 300,000 sq. ft. or larger building at 712 Peachtree St.
Presently, a 15,000 sq. ft., former Citizens Trust Bank branch sits on the site. One sign that Lincoln may have the demand it needs to succeed at 712 Peachtree is GlobalFood Exchange. com. The company has leased the doomed building until it is demolished.
On the other end of Midtown, Scott & Associates has announced plans for a 15-story, 197,000 sq. ft. office tower, tentatively named 1301 Spring Street, at 16th and Spring streets.
With this current flurry of activity, plus likely new space in Downtown and Buckhead, some in the market are now wondering if tenant demand is deep enough to absorb the new space.
"If everybody builds exactly what they say they'll build [in Midtown], there could be trouble," says Steve Rothschild, regional director of New York-based Insignia/ESG. "But it's not likely to happen that way."
One factor Rothschild cites is nearly 500,000 sq. ft. of immediately available office space at One Atlantic Center (also known as the IBM Tower) and 10 Peachtree Place. The space is being vacated by Atlanta-based The Coca-Cola Co. as part of its corporate consolidation.
"With new buildings, it's timing," says Rothschild. "The 10 Peachtree and IBM Tower space are available today. New buildings take 18 to 24 months [to build], and those buildings will catch the next wave of tenants."
Bob Silverman, chairman of Atlanta's The Winter Group of Cos. says he has already seen Midtown success at his company's Midtown Heights project and thinks demand may be evolving, especially with high-tech firms. "Tech companies are having to come up with new ways to provide credit," he says, mentioning that even with tech demand, there are several large tenants looking for space in Midtown.
Holder's Gore thinks it's Midtown's turn in the development cycle. "Buckhead had a round of development that hit the market and was absorbed," says Gore. "But there are deals that went to Buckhead that would've stayed in Midtown if the buildings were there. Now, I think we'll see some Downtown deals go to Midtown in the same fashion."
Deming Fish, director at Barry Real Estate Cos., says, "There is still substantial demand in Midtown." According to Fish, the tech-stock shakeout earlier this year is having a positive effect on the market. "From a real estate standpoint there are more high-quality deals out there," he adds.
Barry Real Estate is completing its renovation of Pershing Point Plaza, two buildings at 1375 and 1371 Peachtree, which will be the headquarters for Internet giant Earthlink.
While office development is getting the most attention in Midtown, don't think that residential developers aren't part of the area's resurgence.
New projects or rehabilitation of existing buildings are happening along Peachtree Street from the submarket's northern edge (the Interstate 75/85 overpass) south to North Avenue, where Downtown and Midtown meet.
Just as its Peachtree Pointe project tops off office development at Midtown's northern end, Atlanta's Dewberry Capital Corp. also plans to build The Ansley, a condominium complex at a site located one block from Peachtree Pointe.
Heading south four to five blocks, residential development picks up again on 14th Street. Dallas developer Genesis Real Estate has an ambitious plan for a 37-story, 686-unit apartment building called West Peachtree Villas. The complex will have street-level retail and rents that may average as much as $1,200 per month.
Developer Jim Borders, whose renovation of the historic Biltmore Hotel was one of Midtown's first comeback successes, also has plans for a residential high-rise at 917 Peachtree.
Another highly anticipated residential project is Post Biltmore. After its success at Post Parkside (on 10th Street, adjacent to the city's Piedmont Park), Post Properties will again try to capitalize on the hot intown market.
Silverman of Winter Group says the reason for Midtown's popularity is obvious. "The alternative is the suburbs, and kids don't want to go there."
When Silverman says kids, he means the young people who are working in and around the high-tech businesses all over Midtown.
Silverman's vision for Midtown includes changing two major one-way streets, Spring and West Peachtree, into two-way streets and lowering the speed limit to nearly a crawl.
Why? "The main purpose of two-way traffic and lower speeds is to make walking safer and more acceptable," he says.
Other residential projects south of 10th include Atlanta-based Novare Group's Peachtree Lofts; Mid City Lofts by Atlanta's Kim King Associates; Legacy Apartments by Trammell Crow Residential; 805 Peachtree Street by Charlie Loudermilk and George Rohrig; and the condo conversion Windsor Over Peachtree .
It seems that one area where Midtown isn't booming is new retail space, at least not in the conventional sense. Almost every new project, both office and residential, has promised street-level retail to foster a walking atmosphere, but only one new retail development has been announced, and it's part of a mixed-use project.
Dewberry Capital Corp. has announced plans for approximately 2 million sq. ft. of office, retail and hotel space at Midtown Square located at 10th and Peachtree streets, but no start date has been confirmed.
As Atlanta's economy continues its expansion, most market insiders are hard-pressed to see any dark clouds on the horizon. However, that doesn't mean they're not realistic.
"Every business would be in trouble if the economy turned upside down," says Rothschild of Insignia/ESG. "But there is an outlook of sustained growth for 18 to 24 months."
Charlotte, N.C. Charlotte, N.C., has quickly become one of the Southeast's most talked-about cities. With the downtown district experiencing tremendous growth, Charlotte can now boast that it does belong in the same category with other leading regional cities.
Bank of America, First Union and Duke Energy are headquartered in Charlotte and occupy a majority of office space in the CBD area. Both Bank of America and First Union have helped Charlotte become the second largest banking center in the country.
"Those three companies dominate the downtown area and are the major cause of the large absorption," says Blair Bryan, president of the Carolina's division of Dallas-based Staubach Co. "It will be interesting to see what will happen to the office space since Bank of America recently laid off 10,000 employees."
Despite the layoffs, Bank of America is planning some major downtown developments. The company is partnering with Atlanta-based Cousins Properties to develop Gateway Village, a $518 million mixed-use facility. When complete, the project will include office and retail space, residential units and a Doubletree Hotel.
Bank of America is also teaming with Dallas-based Trammell Crow to develop Hearst Tower, an 880,000 sq. ft., 48-story office tower slated for completion in the first quarter 2002.
Charlotte has approximately 30 million sq. ft. of office space, with 4 million sq. ft. under construction and 3 million sq. ft. proposed. The city saw 922,000 sq. ft. of absorption in the first six months of 2000, and is currently on track to beat last year's absorption of 2.5 million sq. ft.
Average city rents dropped to $19.20 per square foot this year, down from last year's $19.55. Despite the increase in space, city-wide vacancy rates were relatively flat, rising to 7.98% from 7.61% last year.
Steve Slattery, senior investment specialist for Charlotte's Grubb & Ellis Bissell Patrick, attributes the increase to the year's high absorption. "Absorption is up roughly 400,000 sq. ft. from this time last year."
Staubach's Bryan adds that the advent of Interstate 485 is also driving the market. "The I-485 beltway will change the dynamics of the city."
The industrial market in Charlotte is maintaining a steady pace, with the strongest development occurring in the North and Southwest submarkets.
Richard Porter, president of Charlotte's Queens Properties, says the overall Charlotte market has approximately 100 million sq. ft of industrial space. The city has approximately 23 million sq. ft. of multi-tenant warehouse space and 7 million sq. ft. multi-tenant flex space. The market has an estimated 742,000 sq. ft. of warehouse space, and 217,000 sq. ft. of flex space currently under construction.
The overall vacancy rate is 10% for warehouse, and 13% for flex space. Absorption for the first and second quarter was 1.4 million sq. ft., compared with 1.1 million sq. ft. of absorption this time last year. Rental rates for new institutional warehouse space are $4 to $4.50 per square foot, and the rates for new flex space are $10.50 to $11.50 per square foot.
Companies such as Seattle-based Microsoft Corp. are taking advantage of Charlotte's office and industrial growth. Microsoft's Southeastern customer service operation is located in suburban Charlotte. Also, Bethesda, Md.-based The Meridian Group recently acquired the 1.8 million sq. ft. IBM campus from Armonk, N.Y.-based IBM Corp. for $90.3 million. The campus, located at the University Research Park, is a multi-tenant office, manufacturing and warehouse facility.
Retail activity, similar to industrial, continues to attract key players and developers. One of the largest projects unveiled last year was Concord Mills, a 1.5 million sq. ft. outlet mall developed by Arlington, Va.-based The Mills Corp.
"Concord Mills has spurred a tremendous amount of growth in the northeast area," says Charles Dalton, president of Carolinas Real Data, based in Charlotte. "We are seeing other power centers, office and residential space developing in the area."
Retail development in Charlotte is getting back on track after a slow first and second quarter. A lawsuit brought about by several neighborhoods of the Charlotte-Mecklenburg community delayed development of several retail projects.
The residents claimed a local developer was not properly following the correct zoning process for a planned power center. The city planning department had refused to rezone the property, but the developer received approval from the City Council. The lawsuit contends that the City Council overruled the planning committee's recommendation. As a result, a new ordinance has passed that developers must follow when applying for conditional-use permitting in the city.
"The zoning process definitely caused a slowdown in review and approval for conditional-use permitting," says Slattery of Bissell Patrick.
One development that has not been delayed is the redevelopment of Charlotte's old convention center. Berwyn, Pa.-based LCOR Inc. recently signed a purchase contract with the city. LCOR plans to demolish the center and replace it with Holton Square. The $214 million project will include an office tower, apartments and condominiums, retail space, a hotel, and a trolley/light rail stop. A construction start date has not yet been confirmed.
With recent projects such as Gateway Village and the old convention center, Charlotte is on its way to becoming a premiere city.
Birmingham, Ala. Birmingham, Ala., otherwise known as the Center City, has enjoyed economic success the past year with new development of a significant amount of office space.
Downtown is in the process of receiving two new office towers for the first time in more than 10 years. Locally based Brookmont Realty Group has begun construction on Concord Center, a 150,000 sq. ft., 11-story office tower. The law firm of Lange, Simpson, Robinson & Somerville will occupy the top three stories. Completion is slated for fall 2001.
Not to be outdone, local developer Sloss Real Estate Group has partnered with Atlanta-based Barry Real Estate Co. to build another office tower. The law firm of Bradley Arant Rose & White will anchor the 11-story, 286,000 sq. ft. office building at 1900 Fifth Ave. Construction of the building is set to begin later this year, and completion is slated for fall 2002.
Observers claim these projects will help ease the 95% occupancy rate for Class-A office space downtown. "Downtown has continued to see success with new office buildings and new apartment units under way," says Claude Tindle, vice president of locally based Graham & Co. "The city is steady and has become a prospect other businesses are looking at."
Projects such as the Mercedes-Benz plant in Tuscaloosa County and the planned Honda factory in Talladega County have helped expand the boundaries of Birmingham-based recruiting efforts and have spurred spin-off industries to serve those projects.
"Attracting Mercedes-Benz and Honda has been a huge success story for Birmingham," says Dallas Whitaker, vice president of the Birmingham market for locally based Colonial Properties Trust. "Birmingham has a great future. We have a great quality of life and infrastructure."
Whitaker says the overall Birmingham office market has a total of 14.2 million sq. ft. of space, with a 90% occupancy. Class-A space is roughly 8 million sq. ft. with a 93% occupancy rate, while downtown has undergone 200,000 sq. ft. of absorption so far this year.
Birmingham's CBD district has a total Class-A office inventory of 4.7 million sq. ft. with 85% occupancy. The suburban market has 5.8 million sq. ft. of Class-A space with 93% occupancy.
"The medical industry, financial institutions and law firms occupy the majority of space from an office user's standpoint," says West Harris, director of marketing for Atlanta-based Carter & Associates ONCOR International.
Presently, Birmingham is not seeing a tremendous amount of overbuilding because, according to Colonial's Whitaker, "developers are taking a cautious approach moving forward with new development. They want to make sure the market is caught up."
Unlike office development, which recently began to mushroom, industrial activity is beginning to see a slowdown.
According to the Graham Report/2000, after three consecutive years of increasing occupancy levels, the Birmingham industrial market has leveled off. The city has approximately 86 million sq. ft. of industrial space, with roughly 3 million sq. ft. absorbed per year. While occupancy for the flex sector dropped, data for the multi-tenant sector showed signs of continued strength. The multi-tenant market increased in 1999 to more than 10 million sq. ft., with the addition of 400,000 sq. ft. primarily in the bulk distribution sector.
The flex sector rental rate increases were a modest 2.34%; bulk distribution rates increased 4%; and service centers posted the largest increase of approximately 10%.
"Absorption in the industrial market is keeping pace with supply," says Tindle of Graham & Co.
Birmingham's recent retail activity has excited many real estate observers with the recent construction of several malls.
Brookwood Village, located in Midtown, is currently undergoing a $50 million redevelopment by locally based Colonial Properties Trust. Interior renovations are under way to the 800,000 sq. ft. shopping mall, with completion slated for fall 2001.
Colonial Properties recently completed Colonial Promenade at Trussville, a 388,302 sq. ft. shopping center. The company is also nearing completion on Colonial Promenade Tutwiler Farm, a 212,075 sq. ft. shopping center.
Colonial Properties is not the only developer reaping the benefits of the retail market. Locally based Bayer Properties Inc. is in the process of developing The Summit, a 165-acre mixed-use development. Bayer is currently completing Phase two of the three-phase project. Full occupancy is slated for spring 2001.
The recent population growth Birmingham has experienced bodes well for future development. As companies continue to arrive and create more jobs and opportunities, the city's future remains bright.
"We are interested in economic growth in the community and believe that success will find its way here," says Colonial's Whitaker.
Observers looking back 10 years agree that Birmingham has come a long way. The city has become a stable market for companies looking for economic growth potential.