The momentum of the Charlotte office market continued in the first quarter of 2019, as office rents rose for an eighth consecutive quarter and the city notched a major economic development win with the announcement that BB&T and SunTrust would merge, creating a new bank that will be headquartered in Charlotte. The news came on the heels of announcements late last year that Honeywell plans to relocate its corporate headquarters to the city and that LendingTree would expand its headquarters, creating 436 jobs over five years. The city’s economic strength has been fueled by a growing labor market that was led by the tech sector in 2018. Last fall, CompTIA’s 2018 Tech Town Index found that Charlotte is the No. 1 city for information technology workers when it comes to job opportunity and cost of living. At the time of the report, more than 44,000 IT jobs had been posted in Charlotte over the previous 12 months. That number is projected to grow by 11 percent over the next five years as Bank of America Corp., Wells Fargo & Co. and Ally Financial look to fill IT jobs at all levels. Office rental rates in Charlotte increased by 6.5 percent …
Charlotte has been in expansion mode for several years, due to population growth, excellent logistics infrastructure, low operating costs and low unionization rates. At the mid-point of 2019, the market continues to expand at a healthy rate and is growing outward into Cabarrus, York and Gaston counties. This expansion follows a strong 12-month period ending first-quarter 2019 when nearly 6 million square feet of new product was delivered. Now encompassing 322 million square feet of space, Charlotte is the second largest industrial market in the Southeast. Charlotte’s accessible location and low cost of doing business is attracting many e-commerce and logistics providers, as well as more traditional industrial businesses looking to expand or realign their space requirements. One common theme is consolidation of business units, which has been a significant benefit to the Charlotte market. Among the examples are J.J. Haines & Co. consolidating its Carolina warehousing operations from several Carolinas locations into a 500,000-square-foot distribution center in Cabarrus County and Staples consolidating from multiple Charlotte facilities into a 600,000-square-foot logistics center in south Charlotte. Driven by available land and access to key transportation routes, a look at the market’s growth patterns shows that development and leasing are extending up …
The question today for office tenants and investors is not why Raleigh-Durham, but why not. The Raleigh-Durham market is defined by continued job growth and a thriving technology sector. The Triangle is enjoying significant rent growth, strong absorption and major construction that now has a Downtown Raleigh and a Downtown Durham. Raleigh-Durham’s overall growth continues and was recently ranked No. 1 in the Southeast in projected population growth, posting a 10.3 percent growth rate from 2017 to 2022. This figure is nearly double the 5.5 percent average growth rate for Southeastern cities. Job growth is the primary driver of the region’s expanding presence with over 30,000 jobs added in 2018 through the first half of the year, already surpassing the 24,000 jobs added in all of 2017. Over the last year, we have seen Infosys (2,000), Credit Suisse (1,200), LabCorp (400) and Ipreo (250) announce major job additions to the area. Most recently, Amazon announced 1,500 jobs that will be required for its new fulfillment center. The tech sector is a major contributor to those jobs, and there is a lot of talk about a well-known e-commerce giant and a major technology giant bringing a significant presence to our market. …
Companies looking to attract and retain talent are now offering top amenities, a modern office space and a healthy work environment with a sense of community. Employees are a company’s most vital asset, and firms are willing to pay a higher rate for office space if it provides a place that employees want to work. One of the trends this year in commercial office space is enhancing the work environment. According to a recent Pew Research Center analysis, millennials have become the largest generation in the U.S. workforce. To attract today’s workers, office users must offer an overabundance of amenities. Companies are now providing gaming lounges that include video games, foosball, air hockey and darts. They are also offering napping rooms, coffee shops with baristas and even onsite bars with wine and craft beer on tap. This type of atmosphere enhances employee interaction and provides the employee a place to relax while at work. Technology allows employees to be more efficient, but it will never replace the connection that happens with face-to-face conversations. Companies are looking to create an atmosphere where employees can collaborate throughout the workday, which in turn has a positive effect on worker productivity. The key to …
Several Carolinas markets continue to top national lists for job and population growth, particularly Charlotte and the Triangle. The quality of living and strong fundamentals draw both millennial renters and empty nesters, with no slowdown in demand in sight. In turn, capital continues to pour into the region’s multifamily sector as investors chase higher yields and lower supply pressure while cap rates linger near historical lows. Multifamily Momentum With the record-setting pace of single-family pricing in these markets, renting remains a more attractive option. Developers are responding accordingly and now build product squarely aimed at specific renter demographics. Specifically, developers have raised the level of quality and amenities in the suburban product similar to that of the urban infill movement earlier in the cycle. Strong demographics in these locations produce a renter accustomed to a high level of quality in the unit interiors while also placing value on the convenience and quality of onsite amenities. That’s because empty-nesters are challenging a singular focus on millennials. To many developers’ surprise, the active-adult demographic has shown up to rent much of the luxury product in both the urban core and suburban locations. Steady Inventory Most data providers that track new supply do …
As demand for e-commerce and corporate distribution space continues to drive supply chain expansion in the Southeast, many developers are designing facilities to accommodate the truck-dependent, labor-driven operations present today and for the near-term. While robotics and automated vehicles are exciting to dream about, the reality is that these innovations are not expected to impact industrial building design any time soon in the Southeast. Modern industrial buildings that can support heavier than average employee parking needs while also providing abundant trailer storage are the standard for new projects. At the same time, these buildings need to support advanced technology, automation and extensive stacking and sorting operations. By building with an eye toward long-term tenant needs, developers are working to differentiate themselves in this highly competitive environment. These trends are particularly apparent in the Charlotte market, where developers have added 4.5 million square feet of industrial space over the past year. With a 5.3 percent vacancy rate in the first quarter of 2018, the market is well positioned to absorb the additional 4.7 million square feet of projects in the pipeline. Of that total, 62 percent is either preleased or set to be owner-occupied. Modern Design Demands At the core of …
Solid fundamentals in tandem with soaring population growth in the Triangle market continues to drive rents and occupancy to record highs. Raleigh is repeatedly recognized as one of the nation’s best places to live, work and start a business. As a result, the market has a projected population growth of over 73 percent through the year 2044, outpacing cities such as Boston, Atlanta, Nashville and San Francisco, creating a snowball effect of investment and interest. Investors are finding the greatest opportunities in the value-add space in Raleigh for B and C-class product. Significant shortage of single-family home availability in the Triangle region has forced young and new families to turn to multifamily properties as a housing solution. Due to the demand for mid-size accommodation within middle-class budgets, and very few neighborhoods in that criteria, Class B and C apartments have seen a surge in interest, and in turn, attraction of investor attention. Of the 84 multifamily properties sold through Dec. 1 in 2017, 75 were considered Class B or C and totaled over $1.3 billion, or 76 percent of total Raleigh-Durham multifamily market investment in that time frame. Developers have slightly overbuilt Class A property downtown, resulting in a softening …
The Triangle continues to attract national attention due to job growth, relatively low cost of living, economic diversity, a central East Coast location and its access to three world-class universities. Additionally, the Triangle’s unemployment rates are below the state and national averages. These are some of the driving forces that bring nearly 80 residents a day to the metro area, as recently published by U.S. News & World Report. Triangle retailers, developers and investors are taking advantage of this momentum, and the local retail market is thriving as a result. At the conclusion of third-quarter 2017, the Triangle retail vacancy was 6.7 percent. This represents a 60-basis point increase year-over-year. However, there was over 340,000 square feet of positive net absorption during the same quarter. This stat marks the highest quarter of positive absorption for the market since the second quarter of 2014. There were several notable retail deliveries in 2017, such as Carolina Square, containing nearly 50,000 square feet of ground floor retail space. The mixed-use project is located along Franklin Street in Chapel Hill and is a joint venture between Cousins Properties and Northwood Ravin. The retail portion of Carolina Square delivered 84 percent preleased and is anchored …
Eight years into the recovery, Raleigh-Durham’s office market conditions remain decidedly in favor of landlords, but increased construction following years of limited development activity is at last providing much needed new leasing opportunities for tenants. While a combination of factors, including new construction, drove office vacancy higher by the second half of 2017, the market began the year with the tightest Class A leasing market witnessed since the dot-com boom. Class A vacancy bottomed out in the first quarter of 2017 at 9.1 percent, down from a cyclical peak of 17.6 percent in the third quarter of 2009, and the lowest level since fourth-quarter 2000. Class A vacancy rose to 11 percent in the third quarter of 2017 as a wave of new deliveries hit the market. Total vacancy ended the third quarter at 13.5 percent, up 70 basis points year-over-year. It is worth noting that this figure includes a handful of large, formerly corporate-owned facilities in the Interstate 40/Research Triangle Park (RTP) submarket. Originally constructed for single tenants such as GlaxoSmithKline, Dupont and Reichold, these facilities are likely to need substantial retrofitting to achieve lease-up. While they are certainly a factor in the market, they are not an option …
The Raleigh-Durham industrial and flex market, totaling approximately 129 million square feet, continues to be strong with overall positive absorption. Vacancy is trending lower, making the region a landlord and seller’s market. With increasing construction costs, lower vacancy and solid demand, the rental rates and sales prices are now the highest of any city in North Carolina. Available industrial land is diminishing for development in high-demand areas, and that typically signifies a significant barrier to entry for developers helping keep supply in check. The rental rate for new industrial product is currently in the mid-$5.00 per square foot range and trending higher. Some developers and brokers speculate the Triangle may become a $6.00-plus per square foot market for institutional-grade warehouse space. However, when comparing rental rates to markets like Austin and Boston, Raleigh-Durham is still a very competitive option. Ground zero for the region’s warehouse market is in the general vicinity of Raleigh-Durham International Airport. Most of these distributors are delivering to the local market and need the central location and access to Interstate 40. The highest rates and prices can be found in this submarket and then start to decrease further out. Due to the lack of available land …
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