CLT Black Swans

CLT Black Swans

A few weeks back, a reporter called to ask what I thought about Duke Energy’s announcement downsizing in Uptown. My immediate response was that it’s a black swan event* I wouldn’t have thought was coming.

Ten years ago, I read The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb. A former options trader, Taleb takes the position that expert opinions are certainly flawed—they are overconfident, narrow-minded, and overly committed to a particular picture of the world. Moreover, he writes that the future is unpredictable, adding that we can’t read the tea leaves because they don’t exist.

With the pandemic hopefully retreating into the rearview mirror, I’ve been thinking about other rare outlier events that could be in our future. The nature of these events is that they are improbable. Still, the best defense for these events is preparation. And in that vein, here are what I see as Charlotte’s potential black swans.

1. Something—anything—happens to Charlotte Douglas International Airport.

I’ve always said if you’re interested in getting a barometer of the Charlotte economy, don’t look at the skyline of Uptown; look at the airport runways. The pattern of Charlotte’s growth is directly linked to the health of American Airlines and the Airport.

Consider job creation. In job creation, Charlotte has led the country during the past ten years, thanks mainly to employers setting up base here, knowing they have direct flights to their desired cities. In addition, Charlotte Douglas has often been one of the least expensive airports for airlines to operate out of. But ask any frequent flier and they’ll tell you it’s a bunkering hub for American Airlines, and more than 95 percent of folks leaving from here are on an American flight. American Airlines being broken up or changing its hub and spoke system would have an enormous impact. Essentially, one company could have a detrimental effect on the booster gene of Charlotte.

A hiccup in the management of the airport or a change in American Airlines’ leadership could materially impact the growth of Charlotte.

2. Duke split, shift, or merger.

Duke Energy’s downsizing, similar to the split-up of big banks, is a significant downsizing event. Duke is consolidating into a new building and has announced long-term plans to reduce the Charlotte workforce by 40 percent.

Charlotte’s office market has been among the best in the country in recent years, which has spurred demand in the CBD in recent years (the Central Business District – not the hemp oil derivative). However, the office market is facing an uncertain future. Rent growth, which was once among the best in the nation, has fallen below the city-wide average.

In 2021, firms choosing to downsize or sublease pose a greater risk to the area’s fundamentals. We already see it in office buildings that we lease. Recently a 61,000 SF tenant vacated a year early.

Make no doubt about it – Charlotte’s CBD will remain the epicenter of activity. It is the area most likely to attract national and international occupiers and investors due to its high-rise trophy buildings. Truist Bank chose to establish itself in the area. There will be other fallout from the down news coming from Atlanta. We are working on a film production studio that chose Charlotte over Atlanta. Atlanta is the second largest film production location in the US, NYC is number three. Could Charlotte grow this niche?

As the financial industry’s downsizing fades into the past, the CBD’s employment base continues to diversify. The CBD was once protected by diversity, including local stalwart Duke Energy, but this could change if the rumors of massive downsizing continue.

In addition, it will take a roster of law and real estate firms and consultants who have recently arrived or expanded. Make way for other notable tenants expanding, including Bank of America, Wells Fargo, Duke Energy, and a slew of influential professional and business services firms such as Deloitte and law firm Alston & Bird.

3. Charlotte Mecklenburg Schools loses its way.

Charlotte Mecklenburg Schools is fast becoming one of the largest school systems in America. The system has always wrestled with leadership issues. As the city grows, more voices need to be heard to ensure that the school system is effectively handling the increasingly diverse needs of students.

When it comes to companies considering Charlotte for relocating, my experience shows that CMS is the Achilles’ heel. Senior leadership almost always tells me they must have private school options because they are unfortunately wary of the public school. Regardless of how well CMS is doing (I am a CMS graduate myself – West Charlotte ‘84!), there is a national perception that the school system has grown too rapidly and unsustainably. It’s not a viable option, according to the leaders I hear from. Charlotte needs strong schools to attract strong companies.

Should any of these events occur, I do not know the solution. What I do know is that everyone should be, as Taleb writes, "anti-vulnerable".

And here is where people can take action – for example, when negotiating a lease:

  • We design flexibility into long-term agreements.
  • When representing tenants, we demand termination options.
  • We always fight for renewal options and extensions.


Exact answers are impossible to come by. But what we can do, and should know more than ever, is to plan for the black swan. If you’re interested in assessing your portfolio’s strengths and weaknesses or coming up with a plan for how to protect yourself from the unexpected, give us a call.

*FYI – Nicolas Taleb would likely be irritated by this post and say that these are not truly black swans as he defines them. Click here to understand why.

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