Mar. 19--Charlotte's East Morehead Street has been shifting toward more intense office development for about two decades, but the transition appears to be gaining speed.
The City Council approved a rezoning Monday allowing Insite Properties LLC to build a 12-story office building to replace McEwen Funeral Home's former complex at 727 E. Morehead St.
City-county planners say the estimated $60 million project conforms with uses listed in the city's Central District Plan and is appropriate for the approximately 1.5-acre site.
The height -- 160 feet -- is tall for East Morehead, but planner Tim Manes said the staff felt it was OK in light of Pinnacle Properties 13-story Royal Court condo high-rise under way nearby.
Planners concentrated more on allowable uses than height in their review, but that doesn't necessarily mean the next building will be a high-rise.
"I think what we see on East Morehead Street will be case by case," Manes said.
The site is just outside Dilworth, but Insite principal Jay Blanton said his team still worked with the Dilworth Community Development Association to design a neighborhood-compatible project.
The building will be set back 24 feet from the street, he said, giving it a storefront appearance with ground-level shops and restaurants to encourage pedestrian interaction.
"Everyone recognizes what is going to happen on Morehead," Blanton said. "I think we are taking a major step toward setting a precedent for density and the type of projects appropriate for the growth that will happen in and around downtown."
Insite plans to start construction by the fourth quarter of a building that will have 180,000 square feet of offices on six levels atop six levels of parking and 15,000 square feet of retail.
The developers say the building, to be completed by early 2010, will help satisfy a demand for office space, fueled in part by the center city market's extremely limited supply.
But that's only part of the story behind this potential Next Big Thing for East Morehead.
Real estate experts say the midtown office corridor is developing its own cachet thanks to a desirable location between uptown's concrete and Dilworth's tree canopy.
Tenants in East Morehead buildings can walk to a nearby light-rail stop, YMCA, greenway, parks and restaurants or easily access Interstate 277 without paying $100-plus a month to park the car in an uptown deck.
Office workers say they appreciate the tree-lined streets, the pedestrian friendly sidewalks and the ambience of the historic Dilworth neighborhood.
Commercial real estate broker Tracy Finch of Harris Development Group said she has heard colleagues compare having an office on East Morehead with owning a home on Queens Road.
Her company is working on plans for a four-story office/retail building with underground parking on the former LongHorn Steakhouse site at East Morehead and Euclid Avenue, across from Insite's project.
Offices, shops and restaurants have shared the East Morehead streetscape with apartments and houses since the corridor's earliest days, but offices began to gain prominence in the mid-1980s.
Carolinas HealthCare System, seeking space near Carolinas Medical Center, has acquired several Morehead buildings and completed the six-story, 150,000-square-foot initial phase of a 300,000-square-foot medical park.
Over 20 years, Morehead Properties has amassed about 190,000 square-feet of buildings surrounding its headquarters at 1017 E. Morehead.
In 1996 it renovated and converted the 82-year-old, nine-story Addison Apartments -- once a premier residential address -- to offices at East Morehead and McDowell streets.
"Our buildings stay full, and others here stay full," said Morehead Properties' Chris Moffat. "From our point of view, we are watching others build while our property values go up."
State Street Properties' nearly 1.5 acres at 615 E. Morehead, once envisioned as residential condos, now appears to be of more interest to office developers.
And six-story Morehead Square at 200 E. Morehead, across from a nine-story apartment complex, has space for another office building.
With uptown office space hard to find and parking expensive, "It's no coincidence big chunks of dirt are becoming available on Morehead," Moffat said.
Demand there persuaded Morehead Properties to consider redeveloping the site of the old Salvation Army building, which it renovated for offices at 1051 E. Morehead St. in 1994, he said.
The company hired an architect to work on plans for a project that could be started after leases in the existing building expire in summer 2009, he said.
Height and density are uncertain, Moffat said, "but one of the attractive features of our buildings is they are not overly dense."
East Morehead is in what real estate analysts refer to as the midtown office market, a commercial wedge south of I-277 that also encompasses parts of Kings Drive, Kenilworth Avenue and Providence Road.
Because the area is in the shadow of uptown, demand is particularly strong. "We are hearing from interested folks who want their own piece of East Morehead," Moffat said.
At the end of the fourth quarter, Karnes Research Co. pegged the midtown vacancy rate at 6.3 percent, second lowest among the county's 11 market areas, behind uptown's 3 percent.
That tight supply provided the incentive for Insite to buy the vacant funeral home and bring in a private equity investor to start the redevelopment process.
Blanton said Insite is negotiating with several institutions to assist with financing. No leases have been signed, but leasing agents are talking with several potentially large office tenants.
727 E. Morehead St.
--Size: 12-story building with 180,000 square feet of offices and 15,000 square feet of shops and restaurants on about 1.5 acres.
--Value: About $60 million, including land.
--Name: The address is the tentative name, but anchor tenants will have naming opportunities.
--Timetable: Construction to start in fourth quarter of 2008 and be completed in first quarter of 2010.
--Lease rates: Low- to mid-$30s per square foot annually. Leasing agent is Keystone Partners, www.keystone
--Features: Building will apply for Leadership in Energy and Environmental Design (LEED) certification and include bike racks and showers for tenants, courtyard, green space, rooftop patio, private balconies on seventh and 11th floors. Each parking level will have direct access to an office floor. Cars will enter garage via Royal Court on back side of the building. Office floors will have skyline views.
--Development team: Insite Properties, developer with principal Tony Pizzo leading project; BB+M Architecture, architect; J.F. Schultze Construction LLC, general contractor; Matrix Real Estate Services, project management consultant; LandDesign Inc., site engineer. 727 E. Morehead St.
Royal Court condo high-rise development 727 E. Morehead St.
Royal Court condo site
State Street site