New towers are rising in Downtown Charlotte NC Real Estate and challenging the market for Charlotte business Journal staff writer Katie Finger reports.

Flint McNaughton is two months away from opening the 20 story NASCAR Plaza office tower. The $90 million building is less than half leased, and he’s facing competition for tenants from three other towers rising uptown. But McNaughton isn't worried yet. He acknowledges the market has changed dramatically since Lauth Property Group started construction two years ago. The recession, combined with the meltdown of Wachovia Corp. and planned job cuts at Bank of America have taken a toll on office space demand. And yet the Center City vacancy rate is 2%. And even if projections hold true and vacancies hit double digits, Downtown Charlotte NC Real Estate will still be among the nation's strongest central business districts. For McNaughton, Lauth’s southeastern regional partner, the key has been to recognize that times have changed. When we started the project, the hotel market was about 99% leased, he says. You're expectations do get away with you a little bit with that. But we're confident in our project. McNaughton expects it will take 24 to 30 months to fully lease the building. He acknowledges lease rates have been cut for NASCAR Plaza, though he won't say how those terms compare with the buildings quoted rate of the low $30 per Sq. foot

Brokers and analysts say such concessions are growing more common. I think we'll start seeing some reductions in rent because of increased vacancy, says Andrew Jenkins, managing director of Karnes Research Company. Landlords are definitely willing to pay for upfits. You're getting more than you could before. We'll get to a point where landlords are fighting for tenants. Keep to the sudden shift is the flood of space that would hit the market over the next two years.

NASCAR Plaza, which will add 390,000 square feet at the northeast corner of Caldwell and Stonewall streets, adjacent to the NASCAR Hall of Fame.

440 S. Church St., a 363,000 square-foot building set to open their board later this year.

Wachovia Corporate Center, a 1.2 million Sq. foot tower that will be the centerpiece of a mix use cultural campus on S. Tryon St.

1 Bank Of America Center, a 750,000 square-foot building scheduled to open on College Street in the third quarter of 2010.

The four towers will add about 2.7 million sq. ft to the 14,000,000 sq. ft. uptown market. The buildings are about 66% leased, with Wachovia Tower accounting for most of the tenants. Analyst and market experts think the towers should have lined up more tenants by now. When they started, the market was headed in the perfect direction, says Chase Monroe, a partner at Keystone Partners, who has been in real estate in Charlotte since 1989. Unfortunately, the market has changed drastically, and that's hurt their ability to lease up.

Another concern lies in how much space Bank of America and Wachovia, now part of Wells Fargo and Company will vacate. Both banks are slashing jobs. Real estate brokers say Bank of America could let go of as much as 200,000 sq. ft. in four buildings uptown over the next two years. There has been a lot of chatter that a lot of space is coming back on the market, McNaughton says. But how much space is the $64,000 question. In the last 20 years the uptown market has absorbed about 400,000 sq. ft. of office space each year. Adding 2.7 million sq. ft. of space over two years may be too much for the market to handle, leading to negative absorption. Only two of the last 20 years have had negative absorption. Real estate brokers and analysts say it could take as long as seven years to fill that much space. But Charlotte Center City Partners President Michael Smith says the extra space gives the city an opportunity to recruit new

companies. Charlotte's office market vacancy rate has been one of the tightest in the country for the last few quarters. We’ve had companies that wanted to be here that could because there wasn't any space, he says.