Duke Energy Commits to Charlotte

Charlotte, N.C., office landlords house a large roster of banking and financial services clients and have likely spent some restless nights lately wondering how hard the city will be hit by the U.S. financial meltdown and how Wells Fargo’s purchase of Wachovia Corp. and Bank of America Corp.’s buy of Merrill Lynch & Co. will affect office tenancy.Bank of America employs 15,000 in Charlotte and has announced plans to slash its payroll by 35,000 jobs across the corporation. Wachovia has 20,000 employees in the area. But the city did receive some good news in late February, as Duke Energy Corp. made a major commitment to Charlotte, singing a lease for 500,000 square feet in a 1.5 million-square-foot office tower that was to have served as Wachovia’s new headquarters.After Wells Fargo purchased Wachovia for $15 billion, the need for Wachovia Corporate Center vanished and left a huge chunk of office space seemingly destined to be vacant upon the tower’s 2010 completion. Instead, according to a report on www.cpnonline.com, the building will allow Duke to consolidate space now scattered under soon-to-expire Charlotte leases and to move operations closer to its headquarters. Other companies have signed on for space at 550 S. Tryon St., including Deloitte’s lease for 82,000 square feet and law firm Sonnenschein Nath & Rosenthal L.L.P.’s takedown of 35,000 square feet.Despite the Duke move, however, there is concern for Charlotte’s office market. Office vacancy increased steadily in each quarter last year, according to a Colliers Pinkard report. Vacancy rose from 9.3 percent in the first quarter of 2008to 10.4 percent by year-end, and absorption is also slowing. In the second quarter of 2008, the market enjoyed 365,076 square feet of absorption, but that figure dropped substantially, to 96,552, by the fourth quarter.As in many cities, worries about the length and depth of the recession have slowed landlords’ and tenants’ decisionmaking. Wells Fargo’s purchase of Wachovia, as well as subsequent job cuts and reduced business for vendors, could lead office vacancy to rise by 600,000 square feet, or 0.5 percent citywide and 1.7 percent Downtown, according to Colliers Pinkard.There are some positives in addition to Duke’s commitment. Though Charlotte’s single-family home sale prices have declined, many other U.S. markets are doing much worse. And the city did see employment increase by 1.7 percent and office employment by 1 percent in 2008.