Market Reports

Despite Active Construction in Raleigh-Durham, Office Absorption Outpaces Supply

by John Nelson March 6, 2017

At the close of 2016, over 1.9 million square feet of office space was absorbed in the Raleigh-Durham market and overall vacancy increased by one percentage point from 10 percent to 11 percent. Activity was strong and can partially be attributed to a very active suburban Raleigh submarket that absorbed over 1.1 million square feet. Vacancy in this submarket ended the year at 10 percent, down from a high of 17 percent in 2010. It was also an active construction year for Raleigh-Durham, with developers completing over 1.3 million square feet of new office space. There is currently another 2.7 million square feet of new projects underway, and an additional 2 million square feet of proposed projects. Downtown Durham, an approximately 4.5 million-square-foot market, has multiple office projects underway, including: The Chesterfield: Renovation on the 286,000-square-foot building should be completed soon with the first tenants moving in in July 2017. The project, being developed by Wexford Science + Technology, is approximately 75 percent leased. One City Center: The mixed-use, 432,000-square-foot project has 130,000 rentable square feet of office space and should open in late 2017. The office component is 50 percent preleased. Activity in downtown Durham has been driven by …

March 6, 2017

Market Reports North Carolina Office Southeast Southeast Market Reports

Limited Office Construction in Triangle Area Bolsters Market Fundamentals

by John Nelson October 3, 2016

The Raleigh-Durham office market has not only recovered from the Great Recession, it is solidly in expansion mode, and tenants are facing market conditions not witnessed in 15 years. The current cycle has been marked by a prolonged period of limited development activity. While job growth in the local market has been rebounding for more than five years, the construction pipeline has only recently filled in a meaningful way, and a large portion of the development activity in 2014 and early 2015 was driven by build-to-suits. With Class A vacancy now at a 15-year low, speculative development is heating up again. While projects totaling 1.4 million square feet were underway in the first quarter, most of this product will not be delivered until 2017 or later, and approximately half of the space has already been spoken for. In the near term, the market heavily favors landlords. The Triangle office market began 2016 with strong activity as tenants absorbed 453,997 square feet, driving vacancy down by 40 basis points to 12.1 percent. This figure is down by 180 basis points on a year-over-year basis and has fallen from a cyclical high of 18.7 percent. Class A vacancy ended the first quarter …

October 3, 2016

Market Reports North Carolina Retail Southeast Market Reports

Infill, Transit-Oriented Developments are Driving Charlotte’s Retail Market

by John Nelson September 26, 2016

As Charlotte’s employment surpasses the pre-recession peak of 2007 and the metro swells to almost 2.4 million residents — growing three times faster than the national average — Charlotte is on every retailer’s radar and poised for continued retail growth. Retailers seeking customers with disposable income benefit from Charlotte’s strong affordability index, relative to similarly sized cities, and have enjoyed a positive trend in household incomes, which increased 8 percent between 2010 and 2015. This income growth is bolstered by the 35- to 54-year-old “big-spender” segment, which makes up approximately 30 percent of Charlotte’s population, and is expected to continue to grow in spite of shrinking nationally. Retail developers and investors are also big fans of these fundamentals, which have yielded positive retail absorption over the past 12 months, impressive rent growth of 4.3 percent year-over-year, and vacancy of 5.5 percent, well below the historical average. Similar periods of growth in Charlotte’s history have delivered traditional grocery-anchored neighborhood centers, garden-style apartments and mid-rise office buildings, primarily surface-parked to accommodate the vehicle-centric nature of Charlotte. That trend is changing as Charlotte adapts to the cultural shift and increased density that now prioritizes proximity, access and convenience over McMansions and white-picket-fenced suburbia. …

September 26, 2016

Industrial Market Reports North Carolina Southeast Southeast Market Reports

New Industrial Construction is Easing the Supply Squeeze in Charlotte

by John Nelson September 19, 2016

In recent years, the fundamentals in Charlotte’s industrial real estate market have continued to improve. Overall, the market can be characterized by an increase in tenant activity and the emergence of new submarkets more active on the development front than in the past. Tenant growth can be attributed to organic growth from users expanding, velocity of new deals, as well as emerging submarkets within the market. Charlotte’s central location near the transportation arteries of I-77 and I-85 continues to make the city’s industrial space very attractive to logistics and distribution companies. Charlotte is growing by approximately 20,000 residents per year, according to U.S. Census Bureau data. The population growth, coupled with the trend of brick-and-mortar retailers transitioning portions of their business to e-commerce, makes for a positive outlook on Charlotte’s industrial fundamentals. The strongest tenant activity is in the 25,000- to 75,000-square-foot range, with tenants looking to upgrade the quality and functionality of their space. Beginning in fourth-quarter 2015 and continuing into first-quarter 2016, there was noticeable activity among tenants relocating from owner-occupied facilities to leased spaces. This trend has been driven by a limited supply of options for purchase, historically high construction prices and a steady economy. Furthermore, the …

September 19, 2016

Market Reports North Carolina Office Southeast Southeast Market Reports

Absorption, Job Growth in Raleigh Have Led to Office Space ‘Crunch’

by John Nelson April 18, 2016

Raleigh’s office market is the strongest it’s been in years, with employment and corporate investments continuing to climb throughout the Triangle region. A current lull in the delivery of new construction and the market’s increased popularity have created a space crunch for Class A office space, especially for tenants seeking large blocks. While a good amount of new construction started or continued in 2015, there’s still a gap in “move-in ready” space. Vacancy fell from 11.7 percent in the second quarter to 11.2 percent in the third quarter, causing rent growth for Class A space. Direct asking rent increased from $23.81 per square foot in the second quarter to $24.14 per square foot in the third quarter and is expected to continue to increase until delivery of new construction picks up, which will likely be mid-2016/early 2017. The market has definitely shifted in favor of the landlord, and concessions that were made during the recession have fallen off as owners no longer have to offer them to secure tenants. Desire for Class A space in the Triangle has pushed pre-leasing rental rates to a historic high north of $33 per square foot — and they are likely go higher before …

April 18, 2016

Industrial Market Reports North Carolina Southeast Southeast Market Reports

Raleigh’s Industrial Market Experiences Fifth Consecutive Year of Growth

by John Nelson April 11, 2016

A rebounding economy and robust population growth are driving strong fundamentals across all segments of Raleigh-Durham’s commercial real estate industry. The region added 30,105 jobs during the 12 months ending September 2015, a growth rate of 3.1 percent. Users of all product types are facing rising occupancy costs and fierce competition for quality space. The Raleigh-Durham industrial market experienced positive net absorption of 721,185 square feet through the first three quarters of 2015, marking the sector’s fifth consecutive year of expansion. Increased tenant demand, combined with a lack of new construction, has driven vacancy back to pre-recession levels. Overall vacancy for warehouse and flex space ended the third quarter at 7.5 percent, down by 130 basis points year-over-year. Warehouse vacancy fell by 160 basis points to 6 percent during the same period and is down from a cyclical high of 10.2 percent. Flex vacancy ended the third quarter at 11 percent, down by 60 basis points year-over-year and from a cyclical high of 16.5 percent. Leasing activity has been broad based, driven primarily by organic growth in the region’s existing tenant base. Among the industries fueling the largest transactions are third-party logistics, e-commerce, manufacturing and housing and construction. Finally back …

April 11, 2016

Market Reports North Carolina Retail Southeast Southeast Market Reports

Grocer Expansions, High-Profile Projects Keep Charlotte’s Retail Market Humming

by John Nelson March 7, 2016

The Charlotte MSA continues to experience a high level of retail activity as we go into the last quarter of 2015. With a regional inventory of 62 million square feet of retail space, the MSA has seen more than 8 million square feet of new development proposed. Vacancy rates are holding steady in the 8 to 9 percent range, and average rents have remained stable. Grocers Setting the Pace Retail development activity in the Charlotte area remains driven by grocery store expansion. Publix has opened units in Ballantyne, Matthews, Southeast Charlotte and, most recently, South End, with several new stores approved and in various stages of development. Some of the Publix activity has resulted from conversions of units it acquired from Bi-Lo, while the Ballantyne, Fort Mill and South End stores were new construction projects. Publix will open five more stores in the market in the coming year, bringing its MSA store count to 16. This will include Publix’s first stores in the Cabarrus County and Gaston County markets. Perennial market leader Harris Teeter remains the dominant traditional grocer in Charlotte with a 20 percent market share, which places it, Walmart and Food Lion in close proximity. Harris Teeter, which …

March 7, 2016

Market Reports North Carolina Retail Southeast Southeast Market Reports

Food Fight Among New, Established Grocers Highlights Charlotte’s Retail Activity

by John Nelson September 14, 2015

As Charlotte’s job growth has returned, so has traffic into Uptown during rush hour, a new apartment project on every corner, healthy single-family demand and a food fight. Currently there is an all-out war for grocery market share between behemoths Harris Teeter, Publix and Walmart Neighborhood Market, all adding stores at a record rate, while Whole Foods Market continues to expand within the market on a measured basis. Newcomers Sprouts Farmers Market and Lidl, a German-based supermarket grocer offering discount items, are set to make market entries between 2016 to 2018, with Food Lion planning to refurbish a number of their stores in the market. Pappas Properties has begun construction on a Harris Teeter at Berewick and Raley Miller in a joint venture with Levine Properties, and has filed a rezoning petition to add another Harris Teeter at the corner of Fairview and Providence. Harris Teeter has recently added a store in Cornelius, as has Publix. Publix has recently opened a new store in the booming South End submarket located along the transit line on South Boulevard and has won zoning approval for a store to be constructed at Cotswold. A grocer is also rumored to be scouting a redevelopment …

September 14, 2015

Market Reports Multifamily North Carolina Southeast Southeast Market Reports

Charlotte’s Uptown, South End Set Pace for City’s Apartment Development Activity

by John Nelson September 7, 2015

Lately, Charlotte seems to have more of everything: jobs, residents, young people — all of which has driven more demand for quality multifamily properties in urban neighborhoods with multiple lifestyle amenities. Renters’ desire for parks, transit options and walkable access to work, culture, and entertainment has led Charlotte’s Uptown/South End region to become the fastest-growing apartment submarket in the nation, according to a study by MPF Research. Since the recession, Uptown/South End has experienced a period of remarkable growth in the multifamily market, and has seen an 82 percent increase in units since 2012, the study says. Overall, renter-occupied units make up just over two-fifths, or 40 percent, of the city’s housing market, a percentage that is already higher than the national average and anticipated to increase. As more properties are built, Charlotte’s 5.1 percent vacancy rate is likely to increase over the long term, but demand is expected to remain strong as the city’s dynamic economy and population continue to grow. The area’s population is set to increase about 2 percent annually over the next five years, far outpacing the country’s overall rate of 0.75 percent. Much of that is due to an influx of well-educated, younger people moving …

September 7, 2015

Market Reports North Carolina Southeast Southeast Market Reports

Charlotte’s Industrial Market Rides Wave of Absorption, Development

by John Nelson August 31, 2015

The Charlotte industrial market is extremely well-regarded by most national investors, with consistent rent growth, strong occupancy and increasing values. The fourth quarter of 2014 revealed the third-highest annual net absorption ever recorded in the Charlotte industrial market, continuing a pattern of growth that began in the fourth quarter of 2010. This continued recovery can be directly attributed to a combination of restrained development, expansions by existing space users, an influx of new companies and increased economic stability. Due primarily to geographic constraints and a high demand for land by all types of developers, there is a limited supply of large tracts suitable for industrial developments, which protects the value of existing properties. Air Support Industrial tenants are drawn to Charlotte for its strategic location along I-85 between Atlanta and the Mid-Atlantic states, as well as proximity to the Carolinas, southern Virginia and eastern Tennessee. Quality buildings are available at competitive prices in the region. Charlotte Douglas International Airport (CLT) continues to be a significant economic development driver, and Charlotte’s distribution network will be further enhanced by Norfolk Southern’s intermodal terminal recently completed on 230 acres adjacent to CLT. The terminal will include two loading tracks totaling 9,056 feet, eight …

August 31, 2015

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