From Warehouse to Workspace to Now What?

When a Texas developer converted 200,000 square feet of Charlotte, North Carolina, flex space into a sprawling boutique office campus in 2018, the market seemed promising. But if the sector's current climate is any hint, the timing meant that the project never leased. So, what’s next for a warehouse that was made into an office that now awaits a new use?

Well, following a $15.1 million acquisition in May, the property’s new buyer and leasing team are banking on the city having an appetite for “eatertainment” and an eagerness for “activated retail.” These are buzzwords for a new hybrid class of real estate: a mix of eating, drinking and socializing in destination spaces large enough to handle events and crowds.

Although local buyer Browder Group’s broker, Jay Mitchener, of Thrift Commercial Real Estate — who is also handling the lease up — was not able to disclose which tenant(s) the team is courting at 1801-1831 Tryon St., he indicated that they’re aligned with a lot of other “activated retail” spots popping up in the building's North Davidson (NoDa) submarket. Think music venues, breweries, food hubs, coffee roasteries and alternative recreation activities like axe throwing and pickleball.

It’s a stark transformation for the property, which once was a behemoth light industrial hub that housed hundreds of small businesses over the course of nearly a century. But the 1933-built nexus of Charlotte’s North End seemed to no longer be serving the market’s highest-and-best use by the time Artesia Real Estate scouted it a few years ago.

When the Austin, Texas-based adaptive reuse developer snatched the property up for $8.8 million in 2018, an office conversion seemed like a worthy investment. The building was still mostly leased at that point by light industrial users such as clothing designers and small retail shops, but times were changing, and new office jobs were outpacing the metro’s already surging population influx. Local media covered the gentrification angle quite a bit around that time, but it was clear: the city’s North End was rapidly changing, one adaptive reuse project at a time.

Back then, office vacancy in the NoDa submarket was 2.5% and net absorption was up at around 50,000 square feet, according to CoStar data. But by the time Artesia could deliver and start leasing what it had turned into 125,000 square feet of award-winning adaptive reuse office space, though, the entire world had been upended by the pandemic. The office sector has still not recovered, and with vacancy now at 21% in the submarket and net absorption still egregiously negative, the site needed a new plan.

Enter Mitchener, who helped Browder secure the spot with a new game plan in mind. “We’re targeting what I would call ‘alternative uses,’” he told LoopNet. “We’re not targeting office uses at all. But ‘retail’ is too general to describe it. I’d say we’re looking at ‘eatertainment’ or ‘quasi-retail’ tenants that are almost closer to light industrial.”

He explained that some of the tenants may have an office component at the property, offering a hypothetical example of a restaurateur with five restaurants that needs commissary space and offices along with a café in the lobby. “They are people that are creating activated retail environments, but who need more than 3,000 square feet and can’t afford to pay $60 per square foot rent in the South End.”

With the property split between two approximately 60,000-square-foot buildings, Foundation Supply East at 1801 N Tryon St. and Foundation Supply West at 1831 N Tryon St., he noted that there are several ways to divide the rentable space.

Depending on space requirements, occupiers might lease as little as 5,000 square feet or as much as 40,000 square feet.

But that won’t come without more renovations, Mitchener continued. The space is a wide-open, industrial-chic cavern that Mitchener said “highlights all the natural character of the original building with a ton of really special, unique skylights.” But, he continued, “It was designed for an office project, with common HVAC, common bathroom corridor and things like that. It won’t require huge modifications, but we are going to have to make some changes.”

One of the best selling points for tenants, Mitchener continued, is the site's parking. "Finding that abundance of parking for it in town retail project is hard to recreate given the scarcity of land in the [rapidly developing] city. So that makes it really unique."