At a cavernous century-old former factory on North Tryon, construction crews recently wrapped up restoration work. In the coming months, the rehabbed property will open for offices, a brewery, restaurants, and coworking space.
Austin-based Artesia Real Estate bought the site at North Tryon and Keswick in 2018 for $8.8 million, property records show. At the time, the buildings housed City North Business Center, a hub for local small businesses, all of whom have since left.
This is Artesia’s foray into Charlotte. Like other out-of-town developers, Colin Brothers, the firm’s owner and principal, wanted to invest here because of the city’s rapid job and population growth. Artesia’s portfolio includes other cities that fit that bill, too, including Raleigh, Austin, and Salt Lake City.
Over the next few months, Artesia will be doing interior work like furnishing the spaces. It will be ready for move-in in early 2021.
Artesia undertook the North Tryon project, which it is calling Foundation Supply, without any tenants lined up yet — a challenging prospect in hindsight. Amid the pandemic, businesses of all sizes are still figuring out what their return to the office will look like. Retailers like restaurants have grappled with lost revenue and capacity limits.
“It is a softer environment than it was pre-Covid. But I think (the softness is) in pockets. You’re feeling that in areas like Uptown,” Brothers says.
Depending on how it fills up, Foundation Supply could be a proxy for how demand for new office and commercial space in Charlotte will bounce back.
Brothers says he’s bullish about North Carolina’s recovery. Already, he’s had several businesses tour space in Foundation Supply during the pandemic.
“It’s fairly promising for Charlotte as a whole and for our project specifically, compared with some other markets that we track,” Brothers says.
Brothers also sees the layout of Foundation Supply as advantageous post-pandemic.
Artesia stripped the old brick building closest to Tryon down to its bones and chopped off a huge chunk of it, taking it down from 180,000 square feet to 125,000. The developer opened up a facade facing the parking lot and filled it with tall windows, letting natural light pour in. Just outside those windows, Artesia created a grassy tiered lawn, with ample space to sit.
The property, which is actually a handful of buildings, is a low rise, and tenants will have their own direct access to their spaces. That means they won’t have to crowd into an elevator to get to where they need to go.
Artesia’s approach on North Tryon jibes with a trend in office space development all over Charlotte called adaptive reuse. That means that developers are taking old buildings, many of which are factories and warehouses, and transforming them into creative office spaces, food halls, and restaurants.
Nearby, that’s what happened with Camp North End, which Brothers says was his inspiration for Foundation Supply. Camp North End once housed a Ford Model T factory before ATCO Properties transformed it into a destination for restaurants, entertainment space, and offices.
In South End, Krispy Kreme transformed a 1900s-era warehouse into its new corporate offices. In Optimist Park, White Point Partners redeveloped a former textile mill and turned it into Optimist Hall. Today, it’s home to a food hall and Duke Energy offices.
“That stock is in pretty strong demand in the office community,” Brothers says of adaptive reuse properties.
Artesia’s project is the latest example of investment pouring into a stretch close to the city center where new development has lagged.
For one, it’s in an opportunity zone, an area designated by the state in which developers get federal tax incentives to build. It’s also about a mile from Uptown, and relatively close to the light rail.
“The investment along that corridor was somewhat inevitable once the Blue Line was drawn on the map,” says city councilman Larken Egleston, whose district one includes the North Tryon corridor.
Egleston says new investment into areas like North Tryon is a “double-edged sword.”
On one hand, it could attract new businesses tenants, plus spur more development and activity in the area. But, as was the case with City North Business Center, such investment also threatens to push out existing tenants. The business center housed dozens of small local businesses, and their rent was low.
Brothers says any of the former tenants can resign leases in the new space. But many of their former spots were much smaller than what Artesia has now. Artesia’s spent millions on this project, meaning rents will be much higher.
From a city perspective, Egleston says, you can’t go to either extreme. You can’t allow so much new investment in an area that it pushes out all existing tenants. But you also can’t forbid developers from coming in outright.
As it does with apartment developers, the city could, during the rezoning process, start asking commercial developers how much of their project they plan to set aside for lower-income tenants, Egleston says.
“That’s a conversation we probably need to start having on the office and commercial side. How can we make these units more affordable to businesses that might be displaced?”