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TRANSCRIPT
Mapping the
for corporate real estate and Charlotte
January 2019
2
Agenda
Building the Future of Work 1
Market Observations and Outlook 2
Market Drivers: Fintech 3
Charlotte
Fourth Industrial Revolution:
technology-driven disruption
Future of work and the
human experience
Macro-environment
a complex macro landscape
Stock market near all-time highs
18-year high consumer confidence
Synchronized global growthYield curve flattening
Amazon’s $15 minimum wage
Unemployment dips to 3.9%
$80+/barrel oil
Trade wars
Brexit inching closer
Emerging market risks
Rising debt and deficit
Navigating
game changers
Blockchain Internet of
Things
Virtual and
Augmented
Reality
Ecommerce
and Online
Marketplaces
Sharing
Economy /
Coworking
Autonomous
Vehicles
Artificial
Intelligence
Future of work model
Human ExperienceEnhance user experience
through engagement,
empowerment and fulfillment.
Digital DriveHarness digitization and rich data to
enhance people and enterprise
performance.
Continuous InnovationCombine new thinking, solutions and
processes to drive value creation and
accelerate transformation.
Operational
ExcellenceOptimize enterprise resources and
service delivery to increase productivity,
mitigate risks and ensure high
performance.
Financial PerformanceManage spending to enable growth and
enhance return on investment (ROI).
JLL (2017)
Future of Work – Where ambition thrives www.futureofwork.jll
Powered By Human Experience
Feeling trusted by the
management team
Being able to reply on a kind
management team
will drive change
Trust, above all, has the largest impact on people:
Being encouraged to take initiative
is the new happiness
Top five ingredients to create a unique experience:
Happiness Recognition Personal learning
and development
InspirationCreativity
40% of the respondents feel very engaged at work:
40
11
1
48
% Yes, very engaged
% Yes, somewhat engaged
% Not, engaged
% Cannot say
must come first
Top 3 enjoyed spaces
1. Coworking spaces
2. Telecentres
3. Spaces for shared community interests
1. Spaces for health and well-being
2. Community spaces
3. Spaces for small children
Top 3 desired spaces
Case Study: Optimist Hall
What’s going on:
• Disruption and uncertainty
• People, technology and workplace
• Data and advanced analytics
• People at the core of the workplace
• Workplace as a service
• Operational and financial performance
What you can do about it:
• Elevate the dialogue
• Inspire executive management to take action
• Stretch your thinking to develop a future-state vision
• Expand the scope of corporate real estate
• Change the landscape
11
Market Snapshot
Source: JLL Research Charlotte
66%
34%
Class A Class B
Total Vacancy 13.4%
Submarket Inventory Average Asking
Rent Total Vacancy Under Construction
CBD 21,544,854 $33.29 12.0% 2,514,079
Suburban 29,458,380 $25.40 14.6% 823,891
Total 51,003,234 $28.79 13.5% 3,337,970
Class A Rents $30.88
Class B Rents $23.11
12
Employment growth: Charlotte MSA
Source: JLL Research, EMSI Charlotte
3.2%
Unemployment Rate
2010-2018 Employment Growth
28.5%
2019-2024 Forecast Employment Growth
8.4%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
500,000
600,000
700,000
800,000
900,000
1,000,000
1,100,000
1,200,000
1,300,000
1,400,000
Employment Unemployment Rate
13Source: JLL Research, QCEW
Charlotte employment and unemployment
32,000 jobs were added over the past 12 months, while unemployment levels closed at near record-
level lows, causing a talent crunch across the region
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
-80.0
-60.0
-40.0
-20.0
0.0
20.0
40.0
60.0
Un
em
plo
ym
en
t ra
te (
%)
12
-mo
nth
ne
t ch
an
ge
(th
ou
sa
nd
s) Annual employment change
Unemployment Rate 32,000 jobs
3.2%
unemployment
14Source: JLL Research, U.S. Bureau of Labor Statistics
Charlotte MSA vs. U.S. employment change
The Charlotte economy has grown increasingly diversified since the Great Recession, outpacing
the U.S. unemployment rate in 2018.
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Une
mp
loym
en
t R
ate
Charlotte MSA U.S.
3.9%
3.2%
15Source: JLL Research, U.S. Bureau of Labor Statistics
Charlotte employment vs. occupancy
Occupancy gains across the region have been more consistent over the past 12 months as the
technology sector expands
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
12
-mo
nth
% c
ha
nge
Charlotte region employment change Charlotte region occupancy change
2.9%
2.6%
16
Key suburban markets healthy
New product is driving up rental rates while vacancies remain stable
Source: JLL Research Charlotte
$3
4.8
4
$3
3.1
0
$3
3.2
9
$2
2.7
9
$1
5.8
7
$3
2.1
4
$2
4.2
3
$2
8.2
7
$1
7.2
7
$3
1.6
7
$2
2.4
0
$2
5.4
0
$2
8.7
9
6.6%
12.9%
12.0%
16.5%
18.7%
12.9%
13.9%
11.3%
14.6%
13.3%
17.9%
14.6%
13.5%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
Tota
l V
acancy R
ate
Overa
ll A
skin
g R
ate
Asking Rate Q3 2018 Total Vacancy Rate Q3 2018
17
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Le
asin
g a
ctivity s
.f.
Charlotte region, total leasing (s.f.)
Source: JLL Research
Leasing activity through Q3 is on pace to be about 5% lower than overall 2017 levels
18
Rental rates
Class A asking rents experienced a slight uptick in Q4, while Class B remains stable.
Source: JLL Research
$21.50
$23.79 $23.80
$22.03$22.50
$22.96 $23.06
$25.63$26.49
$29.29
$30.88
$16.23 $16.01 $16.00 $16.14
$17.37 $17.19 $17.57
$18.79 $19.03
$21.46
$23.11
$12.00
$17.00
$22.00
$27.00
$32.00
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q4 2018
Class A Class B
Charlotte
19
Direct average asking rents
Source: JLL Research
Rents continue to climb, reaching $28.70 in the fourth quarter of 2018.
Charlotte
$19.81$20.40
$19.88
$18.84
$20.16 $20.24$20.86
$22.36
$24.03
$26.77
$28.79
$15.0
$17.0
$19.0
$21.0
$23.0
$25.0
$27.0
$29.0
$31.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q4 2018
$ p
er
squ
are
fo
ot (f
ull
se
rvic
e)
20
Strong construction pipeline
The Charlotte market has 3.3 million square feet currently under development
Source: JLL Research
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
2010 2011 2012 2013 2014 2015 2016 2017 Q4 2018
Urban Suburban
Charlotte
21
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Squ
are
fe
et
Net absorption New deliveries
Net absorption and new deliveries
Net absorption slowed in Q4 to 386,321, bringing the YTD total to 4480,566 square feet.
Source: JLL Research Charlotte
22
12.1%
15.6%
17.8%
16.9% 16.8%
17.5%
14.5%
13.2%
11.9%11.5%
13.8%
6%
8%
10%
12%
14%
16%
18%
20%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q4 2018
To
tal va
ca
ncy
Total vacancy
Source: JLL Research
A tightening market has developers keen on going vertical. As a result, Class B owners are
enhancing their properties, delivering product that is prime for increased tenant activity.
Charlotte
23Source: JLL Research
Charlotte flexible space
Since 2010, Charlotte has added 625,844 square feet of flexible office space, with WeWork, Spaces
and Serendipity Labs increasing their footprint. 11
0,3
30
11
3,3
30
11
8,3
30
13
0,3
30
13
0,3
30
22
0,3
30
30
2,3
30
32
9,3
30
55
2,1
75
77
6,2
25
85
0,0
00
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*
Fle
xib
le s
pa
ce
(s.f
.)
Charlotte
24Source: JLL Research
CBD: Construction Activity
Charlotte
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
Charlotte SanFrancisco
Atlanta Houston Nashville Oakland Denver Boston Minneapolis Austin Portland Dallas
Compared to other CBD’s, Charlotte is the fifth largest concentration of new construction in the
United States, far outpacing our peer markets.
25Source: JLL Research
CBD: Construction as a Percent of Inventory
Charlotte
North Carolina is home to two of the top five markets in terms of construction as a percent of
inventory in the central business district.
4.1%
4.2%
4.2%
4.2%
4.6%
4.8%
5.3%
6.7%
6.9%
9.7%
10.9%
11.5%
12.2%
13.7%
14.0%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%
Silicon Valley (Downtown San Jose)
Denver
San Francisco
Chicago
Columbus
Washington DC
Houston
New York (Midtown)
Seattle-Downtown
San Antonio
Charlotte
Austin
Nashville
Oakland
Raleigh/Durham
26Source: JLL Research
CBD: Rental and Vacancy Rates
Charlotte
$24.48 $24.52 $24.65
$25.72 $25.95
$29.46
$30.71
$32.97 $33.90
$18.62 $18.70
$19.98 $20.71
$21.15
$22.84 $23.54
$26.28
$28.43
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
2010 2011 2012 2013 2014 2015 2016 2017 Q4 2018
Tota
l V
acancy
Renta
l R
ate
Class A Rents Class B Rents Total Vacancy
Since 2010 Class A rental rates have risen to $33.91, while Class B rates have reached $27.75
Market Driver: FinTech
28
Employment and Gross Domestic Product (Charlotte)
Eleven occupations, experienced growth of 53 percent from 2012-2018, reaching over
42,300, GDP Increased by 28 percent during this period
Source: JLL Research, Bureau of Labor Statistics, Bureau of Economic Analysis, EMSI 2018
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2012 2013 2014 2015 2016 2017 2018
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
YO
Y P
erc
ent
Change G
DP
(C
harlotte)
IT E
mplo
yment
IT Employment Change in GDP
29
How big is the IT Services industry?
From 2010-2017 IT Services grew from a $2.1 Billion industry to $3.9 Billion or 83% in
the Charlotte Region.
Source: JLL Research, Bureau of Labor Statistics, Bureau of Economic Analysis, EMSI 2018
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
2010 2011 2012 2013 2014 2015 2016 2017
Mill
ions
Data Processing, Hosting, and Related Services Custom Computer Programming Services
Computer Systems Design Services Computer Facilities Management Services
Other Computer Related Services Computer Training
30
Employment Growth
Across the board employment growth, Software Developers, Applications grew by 82%,
followed by Information Security Analysts at 81%
Source: JLL Research, Bureau of Labor Statistics, Bureau of Economic Analysis, EMSI 2018 Charlotte
0 2,000 4,000 6,000 8,000 10,000 12,000
Database Administrators
Web Developers
Computer Network Support Specialists
Computer Network Architects
Information Security Analysts
Computer Programmers
Software Developers, Systems Software
Network and Computer Systems Administrators
Computer User Support Specialists
Software Developers, Applications
Computer Systems Analysts
2018 2012
31
Location Quotient: Employment
LQ measures the relative concentration of an industry when compared to a base region,
Charlotte has 2.6X the Information Security Analysts when compared to the US
Source: JLL Research, Bureau of Labor Statistics, Bureau of Economic Analysis, EMSI 2018
0.9
1.0
1.1
1.2
1.2
1.2
1.2
1.2
1.3
2.1
2.6
0.0 0.5 1.0 1.5 2.0 2.5 3.0
Computer Network Support Specialists
Software Developers, Systems Software
Network and Computer Systems Administrators
Database Administrators
Web Developers
Computer Network Architects
Computer Programmers
Software Developers, Applications
Computer User Support Specialists
Computer Systems Analysts
Information Security Analysts
Charlotte
32
Information Technology: Wages
Peer Regions: Range $125,351 to $88,313
Source: JLL Research, Bureau of Labor Statistics, EMSI 2018
$125,351
$120,837
$104,808
$101,304
$92,519
$89,441 $89,350 $88,313
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
$100,000
$110,000
$120,000
$130,000
San Jose San Francisco New York Boston Dallas Atlanta Chicago Charlotte
Charlotte
33
Office Observations
Rents continue to rise in growing market
• Rental rates continue to climb in Midtown/South End, with Class A average asking rates reaching $34.84 per square foot.
• There is 3.2 million square feet of new construction in the market, 2.5 million is concentrated in the Central Business District.
• All eyes are on Midtown/South End as four key development projects move closer to completion. The Refinery and 300 W Summit topped out, while The RailYard and Dimensional Place progress further as well.
1
Coworking, creative space, and conversions continue into 2019
• Coworking companies continue to expand their footprint in the Queen City, with Midtown/South End next in line. Earlier this year Spaces leased 27,400 s.f. at 307 W Tremont, and now Serendipity Labs and WeWork have entered this booming submarket. Serendipity Labs leased 22,941 sf at The Refinery, while WeWork added to it’s footprint and leased two floors at Beacon’s RailYard development.
• WeWork, headquartered in New York, has grown their presence in Uptown leasing 141,081 across seven floors at 128 South Tryon.
• 9315 N. Tryon St. is an 87,730 square foot office conversion located adjacent to the J.W. Clay Blvd light rail station. This Cambridge Properties owned conversion is one example of the opportunities the University submarket can expect to see as the Blue Line Extension connects the submarket to the CBD.
5
2
Investment moving into the Queen City
• Three buildings in the urban core traded hands in Q3, totaling a combined $167,000,000. Those buildings include; in Uptown, the 458,158 sf Wake Forest University Charlotte Center at 200 N College St, and 129 W Trade St while in Midtown/South End Beacon Partners sold their asset at 500 E Morehead St.
• Lincoln Harris has announced it will move forward with the construction of Capitol Towers II after getting a rezoning position approved on Carnegie Blvd. Also, Capitol Towers I & II are for sale after both buildings are close to full occupancy.
3
Charlotte
© 2018 Jones Lang LaSalle IP, Inc. All rights reserved. The information contained in this document is proprietary to JLL and shall be used solely for the purposes of evaluating this proposal. All such
documentation and information remains the property of JLL and shall be kept confidential. Reproduction of any part of this document is authorized only to the extent necessary for its evaluation. It is not
to be shown to any third party without the prior written authorization of JLL. All information contained herein is from sources deemed reliable; however, no representation or warranty is made as to the
accuracy thereof.
Paul Hendershot
Director of Research
+1 980 819 3868
+1 585 503 6730
Office Observations
Thomas Passenant
Research Analyst
+1 980 819 3849
+1 704 345 2185