Report: Triangle office demand drives up rents, cuts vacancies to record levels

RALEIGH – All the new and planned office towers across the Triangle are not keeping up with demand as rental prices keep going up while vacancies are declining.

So says the lates report from corporate real estate firm CBRE.

Just last week a new $1 billion-plus project was announced for North Raleigh. And towers are sprouting across downtown as well as North Hills, but CBRE’s Raleigh office says rents in the third quarter increased to $28.76 per square foot of Class A office space. That’s the highest seen in the market dating back to 2014.

But in some areas the “ask” price for space is even higher.

“The Downtown Raleigh, Central Durham, and Six Forks Road submarkets are each commanding a Class A average asking rate above $32.00 per sq. ft., which demonstrates tenants’ desire to seek space in an urban setting,” CBRE says.

CBRE Raleigh graphic

Vacancies, meanwhile, declined to 10.7 percent.

Vacancies have not been this low, according to CBRE data from 2014 to today. In fact, vacancies topped 14 percent in the fourth quarter 2017.

But new space continues to be built.

“Construction remains active with nearly 3 million sq. ft. under construction throughout the market,” CBRE says.

Overall, CBRE says the Triangle market “absorbed” 442,000 square feet of space, the eighth straight quarter in which demand has exceeded new supply.

“The market has experienced 1.4 million sq. ft. of positive net absorption year to date,” CBRE adds.

Major deals

Advance Auto Parts announced it will move its headquarters operation to North Hills’ newest tower that is currently under construction. The company will anchor the building with 218,000 square feet.
Duke Health leased 120,000 square feet in Parmer RTP, while Labcorp expanded its footprint and leased an additional 111,000 square feet there as well.
CAPTRUST Tower in North Hills was sold to Preferred Office Properties setting the highest price per square foot for an office tower in the Triangle market at $459.
Notes the report: “The trophy asset sold for $137.8 million, or $459 per sq. ft., setting the highest price per sq. ft. sale of an office tower in the Triangle.”
Northchase Executive Center also traded hands in the Six Forks Road submarket with a $232 per square foot sales price to JPB Holdings. Total price: $39.8 million.
In the RTP/I-40 Corridor, Research Commons, a five-building office park, was purchased by Global Mutual for $81.4 million, or $193 per sq. ft.