Will Camperdown unleash a game of office-space musical chairs?
Jul 25, 2018 04:43PM ● Published by Chris Haire
The new Bank of America location will be at 423 Broad Street in the Camperdown complex. | Credit: Bank of America
A week later, Bank of America announced it would be leaving behind its current downtown home and taking up residence at the yet-to-be completed Camperdown project. The move will not only leave the 101 N. Main St. high-rise without its headlining tenant, but it will slough off 32,000 square feet of office space.
The announcement comes at a time when the central business district has well over 500,000 square feet of vacant Class A, B, and C office space available.
On the bright side: the absorption rate for downtown Q2 landed on the positive side for the first time in three quarters. According to Avision Young, net absorption was 7,748 square feet compared to -17,865 square feet (1Q18), -3,006 square feet (4Q17), and -87 square feet (3Q17).
However, Avision Young's Rhett Craig says it's going to to take a long time for the CBD to make up for that loss of space.
"Are new people coming to the market? I guess not," says Craig, associate in office, health care, and investment services. "We are sort of shuffling tenants between buildings without adding users."
Taylor Allen, brokerage associate at Collier's, notes a similar trend, with tenants leaving older buildings in favor of newer projects, such as the ONE building, RiverPlace, and 110 East Court St., the home of EP+Co.
"These older buildings have struggled to find tenants to back-fill these vacant spaces," Allen says. "I think this has played heavily into the story of the Greenville office market, where new buildings are being filled, but the older buildings are having trouble finding new prospects."
With that in mind, what happens when Camperdown arrives with its 150,000 square feet of office space? How will it affect other office properties?
Like the others before it, the massive project at the corner of Broad and Main could be the latest shining new must-have. Furthermore, it could also be part of the continued shift in popularity of the CBD from the Hyatt end of Main to the Falls Park area.
"I think some of the competitive property will get demoted," Craig says. "I would think that the rates closer to Camperdown will not be as vulnerable," noting the amenities in the area and the high pedestrian traffic.
But while many believe that Camperdown will be at full occupancy when it comes online, Shelby Dodson, first vice president with CBRE’s Advisory and Transaction Services team, isn't expecting a huge migration from older buildings in downtown to the new complex.
"There might be some of that," Dodson says, "but there will be out-of-market groups."
She adds, "I don’t think it will be an entire game of Chinese checkers downtown."
Camperdown isn't the only tony spot with the potential to shake up the office space landscape: Avison Young anticipates a major renovation for one of the CBD's most prominent structures, the Landmark Building.
The current home of Windstream, Landmark offers 350,000 square feet of Class B office space, some 44,000 of which is currently available for lease, according to CBRE. Avison Young anticipates "a major renovation [of the Landmark Building] when the property closes -- increasing the quality of supply downtown."
The report adds, "It will be interesting to see how these two buildings impact the office landscape."
Rents are not likely to fall over the next few quarters, but competition among would-be office-space suitors is increasing, with landlords increasingly offering concessions. Colliers reports that landlords are offering up to a year in free rent, as well as handing out moving and new furniture allowances.
However, Avison Young's Craig says that the advertised price for some space isn't what it appears to be. "We are seeing about a $4 difference between what is listed and what is signed," he says.
CBRE's Dodson, meanwhile, says that concessions are nothing new. "We've always seen that," she says. "There is always some component of that."
Be that as it may, landlords aren't lowering rents yet.
"We see some of the concessions going up a little bit," Dodson says, "but landlords are holding firm on their rates."
Collier's Allen acknowledges that concessions are playing a role in the market, but it's being driven by new owners who've entered the market over the last two years.
"These groups rely heavily on keeping the 'face rate' high in order to protect the exit strategy, whereas other owners in the market would prefer to offer a lower 'face rate,' but less concessions," he says.
"I think we will see asking rates begin to drop over the next few quarters," Allen adds. "We don’t believe the rates will drop significantly, but there will need to be slight reset in market."
With even more space becoming available thanks to Bank of America's move, that reset could come sooner than expected.
Take a spin around Camperdown