Raleigh salutes 2011 as a year of improvement and we welcome 2012 with great optimism. In September of last year, Raleigh received Bloomberg Businessweek’s “No. 1 American City” accolade, which is a measure of the “all-around excellence” of a region. The NCSU Index of North Carolina Leading Economic Indicators, a forecast of the economy’s direction four to six months ahead, rose in October, the first gain in the Index since June. All of the North Carolina-based components of the Index improved, with the leader being a 31 percent jump in building permits, according to Michael Walden, distinguished professor of economics at North Carolina State University in Raleigh. As the economy continues to improve and jobs increase, absorption will take additional existing vacant space.
The cities of Raleigh, Cary, Chapel Hill and Durham make up 98 percent of the 76 million square feet of office inventory in the Triangle area. With 461,119 square feet of absorption year-to-date in the third quarter of 2011, the market remains positive. Owner-occupant companies had a major effect on positive absorption. In the third quarter, nine of the 12 submarkets showed positive absorption and decreased vacancy rate over the previous quarter. Wachovia contributed to the negative absorption in the Raleigh submarket by vacating 68,418 square feet in downtown Raleigh. Overall market Class A absorption was positive for the sixth straight quarter with little change in average asking rents. (Sources include: CoStar Property, The KARNES Report, the Triangle Business Journal and others. Data includes owner-occupant buildings and buildings over 10,000 square feet.)
Companies contributing to positive absorption include: Duke University, Salix Pharmaceuticals, Channel Advisor, Kilpatrick Townsend law Firm, Drucker & Falk law firm, Rex Healthcare, Mustard Tree Investments, Piedmont Investment Advisors, PriceWaterhouseCoopers, RadarFind, WebAssign, Tempest Environmental, Morphormics, QMS Capital, Executive Suites, and Piedmont Community Bank Holdings. Multiple smaller tenants contribute to positive absorption, including: Raymond James, Brown Investments and Atlas Diligence leasing 10,000 square feet or less. These small tenants are the backbone of The Triangle’s economy, with two-thirds of all new jobs in North Carolina being created by these small businesses.
The planned Duke-Progress Energy union continued to impact the office market in 2011. Progress Energy leased 125,000 square feet at 200 Lucent Way in Cary, making way for Red Hat’s future commitment to sublease the 365,000-square-foot Progress Energy headquarters. While the merger was expected to occur in 2011, regulatory approvals will continue into 2012.
The RTP/RDU submarket is the largest submarket in the Triangle. Located within this submarket is the world-renowned Research Triangle Park, one of the most successful developments of its kind worldwide. The 7,000-acre park is home to more than 170 of the most influential and advanced companies on the globe. Fidelity Investments purchased four office buildings, approximately 676,000 square feet, in Research Triangle Park for $34.3 million. Fidelity is renovating the property and consolidating its Triangle operations into one campus. IBM, which employees 10,000 people in The Research Triangle Park, is growing through acquisition of multiple companies. Research Triangle Park companies continue to receive multiple federal grants, private funding and state incentives and awards. Park companies receiving grants include: RTI International, Entegrion, Sequenom Inc., Medicago U.S.A., Avaya, and The Hamner Institutes. Global companies find The Research Triangle Park a great location for major facilities; for example, Syngenta Biotechnology has a research complex under construction.
2012 looks to be a promising year for The Research Triangle Park with multiple development opportunities coming from the new master plan and the selection of a new CEO for the Research Triangle Foundation.
In 2011, SAS opened its new 287,190-square-foot Building C and in 2012, SAS plans to begin construction of one or two new office buildings ranging anywhere from 160,000 to 195,000 square feet at its Cary world headquarters campus.
Cree Inc., with its headquarters in Durham, began its Cree Silicon North expansion in 2011. The development includes 400,850 square feet of office, manufacturing and warehouse space.
Major office sales activity includes the sale of the 259,531-square-foot Quintiles Plaza in Durham for $75.5 million, and Fidelity Investments’ purchase of four office buildings totaling 676,000 square feet for $34.3 million in Research Triangle Park.
— Karen Christy is the director of marketing and research at Colliers International’s Raleigh office, and Corey Liles is the director of planning at Durham-based The Research Triangle Foundation.