NAI Carolantic Realty on Target with Commercial Real Estate Forecasts

January 19, 2012

At last year’s conference, NAI Carolantic predicted that 2011 would be a painfully slow recovery year, but that we would see bottom.  They were right on target once again.  We finished the year with a drop in vacancy in the multipurpose and office sectors and remained the same in retail.  We also had increases in absorption in all but two submarkets.  That was the message to more than 1,700 business and community leaders who gathered at Raleigh’s RBC Center on January 18th for the 27th Annual Triangle Commercial Real Estate Conference hosted by NAI Carolantic Realty. The Conference is considered the authoritative “state of the market” report on the Triangle’s real estate sector and an accurate bellwether on the health of the region’s overall economy.

Steve Stroud, SIOR, Chairman of NAI Carolantic, welcomed attendees noting NAI Carolantic was celebrating “Forty Years of Forward Thinking.”  He also said he was glad to be there given a tractor accident three months earlier.  He thanked family, his team at NAI Carolantic and friends for their numerous acts of kindness during his recovery.

Jimmy Barnes, SIOR, President of NAI Carolantic Realty

Following Stroud’s comments, NAI Carolantic President Jimmy Barnes, SIOR took center stage to review the past year’s commercial real estate landscape and offered Carolantic’s forecast for 2012.

“Remember, leasing is big business, as it has been reported there is over a trillion dollars nationally in lease obligations for public companies alone.  We are finally making headway, but nowhere near where we were in 2007.  The national capital markets are affecting business here in the Triangle. The primary stories are lots of money available but also billions of dollars of maturing debt.  Local and community banks are trying to work with their customers, but vacancies and declining values are big obstacles. In addition, a lack of institutional grade, Class A product, low interest rates, and an abundant money supply have driven up activity and consequently prices.  The Triangle has benefited from this activity with large transactions in the apartment market ($850 million) as well as the office market.  There is still a lot of political unrest, but we are seeing a national recovery, and our local real estate market is as active as we have seen it over the last 36 months.  Nothing robust, but we are optimistic moving into 2012”, said Barnes. 

NAI Carolantic’s survey and analysis showed that, in a market of almost 240 million square feet of office, multipurpose and shopping center space, nearly 32 million square feet remained vacant at year-end.  “Vacancy decreased slightly in the office and multipurpose sectors, and the shopping center market remained at 6% for the third year in a row.  Absorption improved slightly in 2011 and we expect minimal construction in the first quarter of 2012.  The apartment market continues to be on fire with the vacancy rate the lowest in the past decade,” said Barnes.

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Triangle Industrial Market Update

March 18, 2011

At the Annual CCIM Forecast luncheon this past Wednesday, I gave an update on the Triangle industrial market to approximately 300 attendees.  My presentation included a historical look back to 1996 showing vacancy trends over the years with the most recent increase starting in 2006 with 12.5% vacancy to today with 20.8% vacancy.  Sublease space makes up a large portion of the vacancy with over 800,000 square feet on the market at the end of 2010.  It is then no surprise that there has been no absorption and in fact negative absorption since 2008. 

Ed Brown, SIOR, CCIM, NAI Carolantic Realty

The three largest submarkets for leasing activity are the Research Triangle Park, East Wake and North Raleigh/US 1 corridors. Given the high vacancy numbers, one would expect construction to be down and in fact, there was little to no speculative building.  Construction was limited to a few build to suits. Rental rates have been flat since 2000 with most Class A buildings hovering around $4.00-$4.50 per square foot depending on location and ceiling height.  Many companies have taken advantage of current market conditions and traded up to lower their cost to a newer and/or more efficient building.  Industrial building sales were generally in the $41 to $46 per square foot range, and land sales were anywhere from $29,000 per acre in outlying areas, to $100,000 to $200,000 per acre for prime locations.

Today, we see the most industrial market activity in the following sectors: printing, medical, food, electronics and furniture.  I expect our negative absorption will continue through 2011 with several tenants downsizing or moving out of buildings in Keystone Park, Imperial Center, Tri-Center South and Tri-Center North.  Construction costs continue to escalate especially with increasing fuel prices.  Steel has increased 16% this year and concrete is due to increase to $5 per yard in April.

For the future, I expect industrial vacancy levels to be up again this year, and absorption to remain negative.  Rates will be stable and there will be no speculative construction.  Land values will be down, and construction costs will rise.  But, job growth…the engine that drives our economy, should improve which can only help the overall commercial real estate market.

Please let me know if you have any questions or if I can be of service with your real estate needs.


Industrial Market Update

September 2, 2010

Ed Brown, SIOR, CCIM, NAI Carolantic Realty

The Triangle’s industrial warehouse market with over 23 million square feet has shown positive net absorption during the 2nd quarter of 2010. This is significant since the previous seven quarters have reflected negative absorption. Stagnant job growth, a slowdown in the construction industry, and a decrease in manufacturing have all contributed to the negative warehouse absorption. This past quarter was a positive sign for us, but we still have a long way to go before the market reaches equilibrium. 

Additional good news is that due to a limited supply of available buildings to purchase, existing buildings are maintaining their value in Wake and Durham Counties.  We recently had the good fortune of selling an 80,000sf building by RDU airport for $45/psf and a 16,000sf warehouse for $44/psf.  Prices significantly drop in the surrounding rural counties as the Hohn building in Louisburg, (Franklin County), sold for $7.50/psf.  The Purolator building in Vance County sold between $7.00 – $8.00/psf.  The Lenox building in Oxford traded for $19/psf due to an existing tenant in the building wanting to purchase the property. 

Industrial land sales in the Raleigh/Durham area continue to be slow.  We did recently sell an eight acre site on the south side of Raleigh at I-40 and Hwy 70 for $2.45/psf. This is representative of current market values for industrial land.   

If I can assist with any industrial properties in Wake, Durham or surrounding counties, please give me a call at 919-832-0594 or email ebrown@naicarolantic.com.  The Triangle industrial market has been my focus for over 24 years and I would welcome an opportunity to meet with you.