BREAKING: Big office tower for SouthPark

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by Ashley Fahey

Plans have been unveiled for a SouthPark mixed-use development that will include a 19-story office tower in a market that’s seen very little new office construction, thanks to recent high costs of capital and construction as well as post-Covid uncertainty around office demand.

Hines, which has been making a big splash in Charlotte commercial real estate lately, today announced its first ground-up development in the Queen City: The Gallery SouthPark, which will be built along a high-profile stretch of SouthPark.

The two-building project — which will redevelop a key site on Carnegie Boulevard, where Rooster’s Wood-Fired Kitchen is today — will include an office tower with 250,000 sq. ft. of space; a 19-story, 302-unit apartment building and, between both buildings, about 50,000 sq. ft. of retail. The project will surround what Houston-based Hines said will be a plaza with public art.

Paul Zarian, Carolinas managing director at Hines, told The Ledger that there’s been “tremendous positive news” in Charlotte on the economic development front in the past few years, between employment growth and company relocations.

“The office market has tightened,” he said. “There really isn’t much supply on the horizon as you look forward. We think there’s an opportunity to deliver new product that allows Charlotte to continue to attract new companies and just provide a differentiated offering.”

Hines is working in a joint venture with Harris Land, associated with developer Dee-Dee Harris and her husband, Cammie, longtime landowners and members of the Harris family that developed much of SouthPark and Ballantyne. The redevelopment includes the building with Rooster’s, at 6601 Carnegie Blvd., and the former Wendy’s and Bojangles on the adjacent parcel, at 6555 Carnegie.

Hines has hired JLL’s John Ball, Karah Tanneberger and Claiborne Mulhern to market The Gallery’s office space. Construction wouldn’t begin on the office building until a certain amount of it is preleased, meaning a company signs a deal to lease a percentage of the building before breaking ground. Zarian declined to say what amount of the space would need to be preleased for the project to move forward, but said the state of the financing market and prospective tenants’ credit quality would be factors in that.

Ball, senior managing director of brokerage at JLL’s Charlotte office, told The Ledger that the firm is tracking companies that are scouting close to 6 million sq. ft. of office space across the entire Charlotte market, the highest level seen since pre-Covid times. About 30% to 35% of that activity is considered new-to-market, meaning those companies don’t have a significant office in Charlotte today but plan to in the future.

“As we look around the landscape in SouthPark and the market at large, all of the new construction is spoken for — even buildings that are under construction are significantly preleased or effectively build-to-suits,” Ball said.

Notably, SouthPark is the recipient of Charlotte’s most imminent office construction projects. 

Site work is well underway at the future Amwins headquarters on Sharon Road, and TowneBank is getting ready to build a bigger regional headquarters at 6337 Carnegie Blvd. While those projects are more imminent than The Gallery is anticipated to be, that’s three office projects potentially being underway at the same time in a city that, for at least several quarters, has only had one office project underway (Queensbridge Collective in South End).

The Ledger’s Real Estate Whispers newsletter has examined SouthPark’s tightening office market, especially as growing companies like JPMorganChase have taken bigger blocks of space. It’s created what some brokers have called a game of musical chairs in SouthPark, as companies move within the submarket to take more space.

Ball said about 25% of office tenants looking at space in Charlotte are at least considering SouthPark — a submarket that represents 6% to 7% of the market’s total inventory, which speaks to how outsized demand is to availability.

Zarian said projects like Amwins and TowneBank give Hines even more confidence in the submarket, which he added has become a “true mixed-use district.”

Adam Rhew, president and CEO of SouthPark Community Partners, told The Ledger that what his organization hears from existing companies that are growing and companies looking at SouthPark for the first time is that there’s “a real constraint” in big blocks of space. SouthPark’s bread and butter, for many years, has been smaller office deals — the 5,000 to 10,000 sq. ft. range. Although more exception than rule, JPMorgan’s recent lease at Piedmont Town Center was for 145,000 sq. ft.

“Historically, the companies that choose to locate in SouthPark get really comfortable here, and they don’t want to leave SouthPark,” Rhew said. “It is in some ways a self-fulfilling prophecy: a company comes here, they're successful, they want to grow and they want to stay in SouthPark. The more that happens, the more constrained our supply of big blocks of office space is.”

Hines earlier this year rezoned its site to accommodate buildings up to 275 feet tall. It’s not certain yet at what height its office tower will top out, but it’s expected to be close, if not at, that 275-foot mark, which would make it the tallest building in SouthPark. The Towers at SouthPark on Fairview Road are about 210 feet tall, while the Capitol Towers on Congress Street are about 200 feet. Amwins rezoned its Sharon Road site to allow buildings up to 225 feet tall.

Rhew said Hines consulted the SouthPark Forward 2035 Vision Plan to help inform its project. One stated priority in that plan is for new developments to include connectivity (for both vehicles and pedestrians) to the rest of SouthPark, and for projects to face outward instead of turned away from the street.

Rhew said while Hines had already contemplated many of the priorities in the SouthPark plan, it was gratifying to see the plan taken into account with the project design.

A lot of SouthPark’s upcoming development will be on and adjacent to the Carnegie Boulevard corridor, between The Gallery, TowneBank and Symphony Park’s renovation — and while big changes don’t seem to be on the horizon at the Specialty Shops at SouthPark, which is also along the corridor, it’s not insignificant that Asana Partners spent $60M to buy it last month.

Zarian said that at The Gallery, it’s likely the apartment project will break ground before the office tower does, but a timeline for a shovel to be in the ground for either building is still up in the air. The design and permitting process typically takes 15-18 months, and The Gallery is still in conceptual design phases, so more work needs to be done before groundbreaking.

Given current office construction costs and the amenities and quality of the proposed office building, the rental rates at The Gallery’s office space will set a new pricing threshold — certainly for SouthPark, but potentially even across Charlotte.

Zarian and Ball declined to say what rental rates the office building could command.

“This is going to be delivering the best of the best in a premier submarket,” Ball said. “We’re bullish on what those economics look like.”

The retail and public spaces are key to The Gallery, Zarian said, as the ground floor ties a project’s uses together and provides a foundation for tenants to want to locate there. He described the central plaza as the “nucleus” of The Gallery.

“Even though the renderings capture a lot of that vertical architecture, what people will experience is that ground plane, and the retail is a critical component of that,” he said.

The office tower will be flexible to accommodate either a full-building tenant (and The Ledger has reported some groups in the market now that could potentially fill a 250,000 sq. ft. tower) or split to accommodate multiple tenants. But, Zarian said, every floor will have an outdoor private terrace. The penthouse floor will have two such terraces.

Ashley Fahey is The Ledger’s managing editor. Reach her at [email protected]. She also writes The Ledger’s weekly Real Estate Whispers, a newsletter devoted entirely to commercial real estate news — including scoops, market chatter and analysis — in Charlotte. You can add or manage your newsletter subscriptions here.