Charlotte, North Carolina

History: 

Wells Fargo's purchase of Wachovia is THE local market event. Charlotte is preparing for inevitable changes to the 20,000 employee workforce of the city's largest employer.  Wachovia and many financial institutions can trace these problems back to an overvaluation of the residential real estate market. Wachovia's $24 billion dollar acquisition of Golden West in 2006, proved to be the beginning of the story leading to the bank's sale.

Throughout 2008 facing mounting market pressure, Wachovia began reducing costs by 20%.  In September Wachovia had $5 billion in deposits withdrawn by institutions during a "silent run" on the bank.  Under pressure from federal regulators, Wachovia accepted a $2.1 billion offer from CitiGroup to sell three of its five banking divisions, with the Treasury Department agreeing to absorb up to $250 billion in CitiGroup's losses.  Over the next week negotiations with CitiGroup stalled as San Francisco based Wells Fargo and Wachovia agreed to a $15.1 billion dollar deal.  Today CitiGroup has agreed not to block the deal but is seeking damages.

Impact: 

The Wells Fargo deal is favored by taxpayers, Charlotte, and Wachovia shareholders because it requires no government funding, it should keep more local jobs by holding together most of Wachovia's five business divisions, and it establishes an east coast HQ for Wells Fargo.  However, there is a rumor that Wells Fargo might sell one of the business divisions.  Regardless of the positive aspects of the deal, we believe the Wachovia sale will result in some local job losses, as a result of Wells Fargo's plan to reduce expenses 10% annually by 2010.

Local economists estimate the number of Wachovia employees lost in Charlotte ranges from 1,000 to 2,000 jobs, or 5% to 10% of the Wachovia workforce, including many "C" level positions.  This would result in 200,000 to 400,000 square feet of direct vacant Wachovia/Wells Fargo office space in Charlotte.  Given the work many third party Charlotte companies do with Wachovia, an additional 100,000 to 200,000 square feet of office space may also become vacant.  As a result, the total potential new vacant space ranges from 300,000 to 600,000 square feet, adding 0.5% to 1% vacancy to the total office market.  If half of these job cuts are in Downtown, then it would add 1.7% to the downtown vacancy rate.

Despite the impending changes and emotional loss of a Charlotte-based bank, public opinion of the Wells Fargo deal is positive.  In a press release, Wachovia CEO Bob Steel commented, "This deal enables us to keep Wachovia intact and preserve the value of an integrated company, without government support."  Economists point to the strength of Charlotte as a permanent retail banking hub, with established intellectual capital providing the future workforce for Bank of America with its $3 trillion in assets and the new Wells Fargo/Wachovia with its $1.4 trillion in assets.

Future Unknowns: 

As markets are changing weekly, there are many unknown future impacts on the city.  How much of the $700 billion government bailout will be used to purchase bank stocks and how much will be used to buy non-performing mortgages, and what level of regulatory control might result?  What's the impact of Bank of America's acquisition of Merrill Lynch for local job growth?  How will the banking industry change with fewer national players?  When will the credit markets become active again? When will lender and borrower confidence be re-established?  Though the impact of these unknowns will not be realized for some time, Charlotte will weather the storm and continue to be a strong national marketplace for companies to grow their business.

About Colliers Pinkard

Colliers Pinkard recently completed the consolidation of its ownership structure with Colliers Turley Martin Tucker, Cassidy & Pinkard Colliers, and Colliers ABR, forming a holding company that is one of the nation’s largest commercial real estate service firms.  The consolidated entity completes more than $13 billion in worldwide transactions annually and manages more than $30 billion in real estate.  The holding company’s portfolio totals 300 million square feet under property management, 210 million square feet of space for lease, and $5 billion in capital markets transactions annually.  The Corporate Solutions division sustains more than 20,000 locations for Fortune 1,000 companies and delivers a new location “Every 80 Minutes.”

About Colliers International 

Colliers International is a global affiliation of independently owned commercial real estate firms. The organization's 10,092 employees span the world in 267 offices in 57 countries. On a worldwide basis, Colliers manages 672,945,918 square feet, and has revenue of $US 1,620,958,349.

Contact Information

Kate Reilly
kreilly@collierspinkard.com 

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