2016: The Year of Construction

2Q16 Colliers Market Report

Read for Colliers 4Q16 Triangle Office Market Report!

Here’s your Capital Compass perspective:

With 2016 numbers in, Colliers releases a full review of the Triangle office market. Two notable takeaways: one, office demand fueled record construction numbers with over 2 Million SF of new construction and 15 buildings in the pipeline and two, absorption in the Triangle remained positive for now 8 consecutive years.

Raleigh business owners and tenants will find interesting:

  • The Triangle vacancy rate remained 1.7% lower than 4Q15, at a rate of 7.9% of space open for rent in the market.

  • Class A office rental rates rose to $25.62 per SF, 72 cents higher than 3Q16.

  • Central Business Districts continue to dominate the rental rates with Downtown Raleigh reported the highest overall average rental rate at $27.61 per SF.

How does this apply to business owners and tenants?

2016 fundamentals will continue into 2017. What this means is increased rental rates and continual factors that favor a "Landlord" market.

For tenants, expect to see large absorption numbers continue in 2017 (aka your competition taking big blocks of space), with vacancy numbers rising minimally if any. Rental rates will continue to push up, so don't expect large concessions in this regard. The Triangle is very close to becoming a $30-35 psf market and for the quality of space being constructed, the rates are justified.

For growth stage and startup companies, although space is getting more and more expensive, what is encouraging is the new co working opportunities anchoring and leasing the new buildings and construction in Raleigh and Durham. With more competition in the shared work space arena, don't be surprised if concessions and rates go down to work month to month in HQ Raleigh, Industrious, AU etc. Expect to see at least a few national coworking/shared space brands (can we say WeWorks?!) land in the Triangle in 2017.

- Capital Compass

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