High-Rise Real Estate a Hot Commodity

Publication: CHARLESTON GAZETTE
Published: 03/13/2007
Byline: Sarah K. Winn , Staff Writer 

The 10th floor of the Chase building in downtown Charleston is locked. Not that there is anything there to take.

From the raw space’s bare windows, a future tenant will have a view of downtown, the state Capitol and South Hills.

“Most tenants want the southeast corner, facing South Hills and the Capitol Complex,” said Howard Swint , an associate broker with the commercial real-estate firm McCabe-Henley LP. “And this building has a parking complex below ground. You wouldn’t want to have the space look out on a parking garage, instead of the state Capitol.”

The 10th floor is a downtown Charleston rarity — a more than 12,000-square-foot, top-of-the-line commercial space looking for an occupant, Swint said.

Downtown, the five high-rises — Chase Tower, BB&T Square, United Center, Huntington Square, Laidley Tower and City Center West — have Class A designated space. With more than a 95 percent occupancy rate, the market is holding steady. And it should stay that way, some downtown real-estate brokers and owners estimate.

In real-estate terms, a Class A designation is fairly arbitrary and market-driven, Swint said. Newer buildings with on-site parking, security systems and upscale features receive Class A status, he said. Also, being close to restaurants, shopping and business clientele helps determine the designation, he said.

As a result, Class A space also carries the highest per- square-foot lease price. In Charleston, the average is $20.37 per square foot, Swint said. But that is only for the lease, he said.

If the space is bare, build-out costs can range from $40 per square foot to more than $100, he said.

Swint credits the influx of West Virginia’s energy companies into downtown for the high occupancy rate.

Because most of the companies conduct business with law firms and accounting companies already downtown, it only makes sense for them to be nearby, he said.

Michael Thompson, a partner with Realcorp Inc., a full-service leasing and brokerage firm that operates LaidleyTower, agreed.

Two large energy companies — Peabody Coal and Mangum Coal — moved into Laidley for that reason, he said.

One specifically moved because their law firm was in the building, he said.

“There is a certain synergy in downtown,” he said. “They [energy companies] like to be able to ride the elevator up or down and do their business.”

At Laidley Tower, 10,000 square feet is available for lease in “specialized suites” of 1,000 to 6,000 square feet each, he said.

Thompson agreed that the market is very stable downtown and doesn’t see any changes on the horizon.

“You have a cycle to some degree, based on supply and demand,” he said. “But with no construction, you are going to keep your occupancy level.”

Still, the Class A market in the Kanawha Valley could see some vacancies and additions, thanks in part to BrickStreet’s impending departure from Kanawha City.

“I don’t think anyone should be building any substantial Class A office space,” said Ed Maier, president of General Corp., which owns City Center East — the current home of BrickStreet in Kanawha City.

“There is going to be a glut of office space and it will take a long time for this community to absorb the space,” he added.

City Center East has more than 80,000 square feet and on-site parking. And, with planned upgrades like new elevators, the building could easily command Class A dollars, said Donna McGivern, executive vice president of RealEstate Resources, Inc., a property management and leasing firm that operates City Center East.

Local companies wanting to expand or, even better, other businesses looking to locate in Charleston should consider the building, she said.

Also, General Corp. could have more office space at City Center West on Pennsylvania Avenue when their biggest tenant, Chesapeake Energy, opens its new headquarters in NorthGate Business Park, Maier said.

So, how does a company go about filling empty space?

“Stealing tenants from other people,” Maier said.

“People can fill their vacant space by cutting their prices and enticing companies to move. Economics 101 still works.”

Thompson and Swint said attracting new tenants means following up with businesses that are looking to grow.

Also, a company’s Web site and old-fashioned word of mouth play major roles, they said.

Despite some pending vacancies, General Corp. is doing very well in the downtown market, Maier said.

City Center West is full and has been for nearly 26 years, he said.

“There are ups and downs in all markets,” he said. “But I’ve always had a positive feel of the Charleston market. It’s the seat of government, and there has always been demand for space.”

To contact staff writer Sarah K. Winn, use e-mail or call 348-5156.