Triangle Office Space Absorption, Supply Zoom Forward
Raleigh-Durham office leasing exceeded 3M SF in 2017, the highest level in the last 10 years, according to JLL data. Developers are responding: last year, 1.7M SF was delivered to the Triangle market, and now there is more than 2.3M SF of office construction in the pipeline.
Tenants are eager for the new space. Projects over 100K SF had an average pre-lease rate of 65.4% last year, JLL reports.
Tech companies are especially keen on new space in Raleigh-Durham. For example, SolarWinds, an information technology management company, inked a lease for more than 41K SF at Forty540 last year, which represented an expansion for the company, adding more than 18K SF to its Raleigh-Durham footprint.
Align Technology, the makers of Invisalign, took 80K SF in the same building. Infosys, India’s second-largest information technology firm, will occupy 60K SF at its new technology and innovation center at Legacy at Brier Creek.
Besides Forty540 and Legacy at Brier Creek, the other major Triangle office deliveries in 2017 were the Center for Technology & Innovation, Midtown Plaza, CentreGreen Three, The Chesterfield, Carolina Square C and Wade IV. Collectively, these deliveries are 76.4% leased, JLL reports.
Will development mean more of a tenant's market as new properties come on the market in 2018?
The Raleigh-Durham office market might still favor landlords, but new product promises to change the equation a bit, according to Avison Young's Elizabeth Gates, writing in REBusiness Online. The new development will at least offer more options in a previously very tight market.
Class-A space was 9.1% vacant in the first quarter of 2017, the lowest level in 17 years, but as new space entered the market, such vacancies rose to 11% by Q3, Gates noted. The total Triangle market office vacancy stood at 13.5% in Q3, up 70 basis points since a year earlier.
"Overall, conditions are likely to remain in favor of landlords over the next 12 months, but upward pressure on vacancy rates should provide tenants with a bit more leverage in 2018," Gates wrote.