Q2 2012 Raleigh-Durham, North Carolina Office Market Trends

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Q2 2012 Raleigh-Durham, North Carolina Office Market Trends

Reis reports that the 37.3-million-square-foot Raleigh-Durham general purpose, multi-tenant office market has a second quarter vacancy rate of 14.9%. The rate is down 10 basis points from the first quarter and down 80 from 12 months earlier. The rate increased 10 basis points in July. This market has struggled with double-digit rates for some time now, and the best that can be said for the current scenario is that the rate is at least below the 20.0% range, as recorded from 2002 to 2004. The rate was actually as high as 17.0% in 2010. For Class A space, the vacancy rate is 12.0%, down 110 basis points over 12 months. The rate was 11.8% in the first quarter. Class B/C second quarter vacancy remained high at 18.3%, down 20 basis points for the quarter as well as year-over-year.

As of Reis’ most recent construction data, the 59,000-square-foot Measurement Building, which finished in July, is the sole multi-tenant completion thus far in 2012. As note previously, the Bio 26 building is still under construction for completion in November 2012. Building had been fairly active here until last year, adding 8.1 million square feet from 2002 to 2011, although net absorption trailed at 5.4 million square feet during that time span. Reis reports second quarter net absorption at 8,000 square feet, although another 14,000 were added through July. The second quarter saw asking and effective rents increased one cent to $20.18 psf and $16.03 psf. The year-year-year gains are 1.0% and 1.2%. July data show incremental gains. Reis reports Class A asking rents finished the second quarter at $22.05 psf, and B/C rents at $18.03 psf, up 0.1% and unchanged for the quarter. Modest overall increases of less than 2.0% for both measures are forecast for 2012, with more substantial gains not forecast until 2014.

Cushman & Wakefield reports an overall vacancy rate of 13.7% for Raleigh-Durham office space, down 20 basis points over 12 months, and a second quarter direct asking rent of $19.07 psf, down 2.0%.