IRR-Raleigh Mid-Year Viewpoint 2015 Local Market Report - Office
The local office market has begun to see expansion, particularly in the Raleigh CBD, along with the Cary, West Raleigh and RTP submarkets. There is a flight to quality for Class A tenants, as the existing Class A stock predominantly was more than 10 years old. These tenants are willing to pay the higher rates for true Class A space. Most new office development is being undertaken only after major tenant commitments, but some speculative development has been initiated. Additional projects planned include a 10-story building at Wade Park and the 19-story Edison in the Raleigh CBD. Vacancy rates for Class A space will trend up as new inventory is introduced, but many Class B tenants will likely trade up for older Class A space. The Class B properties will continue to struggle in the non-CBD submarkets. Investor interest in office properties has spiked, with major transactions including Colonnade II, Regency Creek I, the former Ericsson RTP Campus backfilled with Lenovo, Brier Creek Medical II, Palisades II, 2605 Meridian, Newcastle South and the 25 building Duke Realty portfolio at Perimter Park to Trinity Capital Partners.
Other significant Class A & B properties are currently being marketed with strong investor interest, which is pushing up pricing and push down cap rates. The Raleigh-Durham has a diversified economy and quality university system, which coupled with the relatively low costs of living and labor is attractive to major companies seeking to relocate operations. Continued improvement in the office sector metrics is anticipated in the near term.
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IRR Mid-Year Viewpoint 2015 comprises a National Overview report and 300+ two-page Local Market Reports for all key property types as well as additional resources, including metrics methodology, graphs, and tables; these free reports may be downloaded from IRR’s site here.