Strong Fundamentals, Innovative Economy Fuel Triangle Office Market in 2017
Please read my recent market recap for Raleigh and the Triangle in the Southeast Real Estate Journal!
Here’s a few excerpts for your Capital Compass perspective:
The Raleigh metro has consistently placed nationally as a top place to live, work and play, and in 2017 that continues to be the case. The thriving central business districts (CBD) of Raleigh and Durham, as well as the world renowned Research Triangle Park, have fostered success and corporate growth in the life science/biotech, IT and pharma industries. Being home to three neighboring Tier1 research universities (unmatched anywhere else in the country) makes Raleigh and the Triangle as a whole a hub for innovation, employee growth and office expansion.
The Triangle office market has continued strong fundamentals from 2016 into the first quarter of 2017. Average rental rates in 1Q17 increased $0.51 from 1Q16, with downtown submarkets averaging bumps of over $2.75 from 2016. Class A office rents currently run at $25.62 psf for the Triangle region, with CBD districts demanding higher averages of $28.81 psf. Rental numbers will continue to push up as the average Triangle vacancy rates continue their steady decline from 2008. 1Q17 vacancy rates remained in single digits at 7.9% (a drop of almost 200 basis points from 2016).
Employment numbers remain favorable, with unemployment rates reporting as low as 4.2% in March 2017. The Triangle also added over 3,200 jobs in 54 new and expanding companies, creating a total company investment of over $91 Million in 1Q17.
Large Development Activity
The Triangle is under a boom of development activity. 2016 ended one of the hottest years of office construction in the Triangle, with over 2 Million SF of space under construction, the most Raleigh-Durham has had in its development pipeline in 10 years. Spread out over 15 projects, the new developments continue to focus in the strongest Triangle submarkets of CBD districts and the Research Triangle Park.
Owing to the live, work, play atmosphere and tenants’ abilities to have denser footprints, the Downtown Raleigh, Downtown Durham and North Hills submarkets continue to attract marquee, Class A projects. Kane Realty’s new Midtown Plaza in the upscale North Hills submarket delivered 329,213 SF in 1Q17. Kane is also under construction for 267,000 SF of high rise office space at the Dillon warehouse in Downtown Raleigh, with close to 1 Million additional SF proposed in the Raleigh CBD by rival developers. Durham’s downtown currently has over 400,000 SF under construction through a mixture of high rise office and redeveloped warehouse spaces, a welcome sign in a submarket that has reported only 2% in vacant space for the past six quarters!
For more on the Raleigh market and Leasing Activity, please read our whole article here!
- Capital Compass