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.


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.


Nothing Could Be Finer…

September 24, 2010

We can’t say it enough…the Raleigh/Durham region is one of the best places in the US to live, work and play.  This was reconfirmed this week when I attended the Greater Raleigh Chamber of Commerce Board meeting and heard the latest Economic Development report.  From May 15-September 15, Wake County Economic Development has assigned 12 new projects, had 7 client visits and had 104 existing industry interactions.   Twenty projects are actively being worked on by staff and will represent a potential total of $305,625,000 in new investment and 3,293 new jobs.  There have also been 18 companies who have relocated or expanded in the area since May.  They include:  BB&T, Deere & Co., Kyma Technologies, Inc., Rex Healthcare, WakeMed Health & Hospitals, Inspire Pharmaceuticals, and Pensk Truck Leasing Co.  These 18 companies account for 267 new jobs and over $167.9 million in new investment.

Jimmy Barnes

Jimmy Barnes, SIOR, President of NAI Carolantic Realty, Jbarnes@naicarolantic.com

Despite the sluggish commercial real estate market, we do see some activity.  One of our brokers, Scott Hadley, just completed a large lease renewal and expansion for FMI.  Another broker, Gray Creech, closed on two office condos, and I recently completed at 25,000sf lease with BeavEx in RTP. We continue to work with several clients in locating new sites for their operations. In addition, we are helping several banks dispose of excess real estate with closings occurring in North and South Carolina.

Let us know if we can be of assistance to you.  As the song goes, “Nothing could be finer than to be in Carolina!”

NOTE:  Be sure to mark your calendar for our 26th Annual Triangle Commercial Real Estate Conference scheduled for January 12, 2011 at the RBC Center in Raleigh.  This invitation-only event continues to be one of the most unique gatherings of Triangle business and community leaders.


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.


Market Activity

August 12, 2010

Many of you may know that NAI Carolantic has researched and reported on the commercial real estate market for over 25 years as it relates to vacancy, absorption, new construction, etc.  However, you may not know we also track market ‘activity’ in several ways.

One of the ways we study activity is by the number of prospects in the market looking for property to buy or to lease.  In the first quarter of 2010, we saw an increase in activity, followed by a decrease in the second quarter.  Recently, however, we have started to see an upswing in activity. Things are not getting better as quickly as we might hope, but they ARE getting better.  I’m thankful I am living in the Research Triangle area and so are many of my clients. 

Richard Hibbits, Vice President, rhibbits@naicarolantic.com

As an example, despite being hammered for the last two years, most of my retail clients have survivied thankfully.  None of them expect a quick return to a buoyant economy, but they would be the first to tell you they are also glad to be in the Research Triangle area instead of almost anywhere else in the country.


An Intern’s Perspective

July 12, 2010

This summer, I have had the opportunity to work as an intern at NAI Carolantic Realty. My experience has been enjoyable and educational, teaching me a tremendous amount about commercial real estate and the Triangle area in just a short time. I feel fortunate to have been able to develop and practice skills with NAI Carolantic that will undoubtedly prove useful in the “real world”, wherever the future may take me.

My interest in commercial real estate is quite new, growing from my attendance of the 25th Annual Triangle Commercial Real Estate Conference this past January. It wasn’t that I found the 2010 market forecast particularly inspirational, but the fundamental facets of the real estate business drew me in. I liked Steve Stroud’s characterization of real estate as a finite, non-renewable resource that would prove recession proof in the long term, and the event left me wanting to learn more.

My internship has facilitated that learning, and I continue to pick up new information every day. Even from the back seat, it is pretty clear that it is a tough time for commercial real estate. Fortunately, there are signs of renewed activity and a case for optimism in the Triangle. I see brokers working harder than ever because opportunities are out there, and our market is one of the most promising in the country.

Byron Bryan, Intern, UNC-Chapel Hill

I truly appreciate having the opportunity to work with the people at NAI Carolantic. They have gone out of their way to help me learn, and I think that is a reflection of the way they approach their business and community endeavors. It is no surprise that NAI Carolantic is the Triangle’s leader in commercial real estate, and a great asset to the community.


Job Creation Planned-Economic Growth Predicted

June 18, 2010

According to Manpower’s quarterly employment outlook survey, 19% of employers in the Raleigh-Cary area plan to hire new staff.  Jobs in construction, goods manufacturing, transportation and utilities, education and health services, leisure/hospitality and government are the top areas for growth.  John Connaughton, a prominent economist for UNC Charlotte predicts output increases in nine of the state’s eleven economic sections combining for a total of 2.2% overall growth by the end of 2010.  This would be the first sustained positive growth in two years according to the Triangle Business Journal.

Internationally, according to the Wells Fargo Securities Economics Group, most countries reported positive GDP growth in the first quarter.  The report stated, “Recent monthly indicators suggest that global economic activity has continued to expand.  Although China may be slowing from the super-charged pace of growth earlier this year, the Chinese economy still has plenty of momentum behind it.  Moreover, recent monthly data from Japan, Korea and Taiwan indicate that the expansion in Asia, which began about a year ago, remains intact.”  

Scott Hadley, Broker, NAI Carolantic Realty

With over 325 offices worldwide, including China, Taiwan and Korea, we can help you there or here at home with a market analysis of your real estate position.  Please give us a call at 919-832-0594 or send us an email at questions@naicarolantic.com.  We look forward to an opportunity to be of service.


Which came first, the Ranking or Renewed Activity?

June 3, 2010

Many of you know, Portfolio.com rated Raleigh as the number one U.S. metro with the best quality of life.  Major factors in the decision were the population growth rate (37% total increase since 2000), the large supply of upper level jobs (44% of Raleigh workers hold management or professional positions), a well-educated workforce (41% of the workforce holds a bachelor’s degree), and the abundance of new homes (over half of all houses in the Raleigh area were built within the last 20 years).

Additional positive news was from the Employment Security Commission of NC, indicating overall unemployment for the Triangle area dropped to 8.1%. Orange county reported the best unemployment numbers with 5.9%. Wake and Durham Counties followed close behind with rates of 8% and 7.4%.

What does this mean for the commercial real estate market?  Renewed Activity! 

Jimmy Barnes

Jimmy Barnes, SIOR, President of NAI Carolantic Realty

Just this past month, our brokers handled approximately 140,000 square feet of leases involving office, flex, warehouse and retail space. Many of these transactions were new leases and others were lease renewals in existing locations.  In addition, NAI Carolantic brokers handled several sales transactions with a total value of approximately $7 million. 

Regardless of whether the rankings help our area first, or the renewed activity help generate the rankings, the market is showing signs of recovery.  Please let us know if we can be of help to you.


State of the Research Triangle Region

May 27, 2010

Moss Withers, Broker, NAI Carolantic Realty

I was fortunate to attend the annual “State of the Research Triangle Region” presentation this morning at the Sheraton Imperial.  Approximately 800 of the area’s leading business executives attended the breakfast as a great way to network and understand what has taken place over the past year in the Triangle corporate community.  Charles Hayes, President and CEO of the Research Triangle Regional Partnership, gave the audience an in-depth look at the region’s economic health and competitive position for the past year.  He also discussed areas of focus for the community moving forward. 

“Despite the one-year employment decline, the region posted a net employment gain of 50,000 over the past five years, with the fastest-growing jobs in healthcare, professional and technical services and educational services.  These job categories reflect the strength and growth of the region’s world-class life sciences and technology clusters, particularly pharmaceuticals and advanced medical care, as well as its major healthcare facilities and many institutions of higher learning,” said Hayes.  “The new year has brought signs that economic recovery is underway.  Through the first quarter of 2010, companies in life sciences, technology, defense and other industries have announced more than $65 million in investments for projects that will create another 900 jobs over the next few years.”

NAI Carolantic Realty was pleased to provide RTRP with the latest commercial real estate statistical information as it relates to vacancy, absorption, rental rates, and new construction for the office, multipurpose and shopping center categories.  As brokers, we often use the information RTRP has organized and provided as another marketing and analytical tool for both current and potential clients. 

For additional information on the presentation this morning, contact the Research Triangle Regional Partnership office at 919-840-7372 or visit them on the web at www.researchtriangle.org.  If we can be of assistance in analyzing your real estate position, please give us a call at 919.832.0594, or visit us on the web at www.naicarolantic.com.


Gaining Traction in Today’s Real Estate Market

May 13, 2010

The NAI Carolantic brokers recently attended a two-day regional NAI meeting to discuss current economic trends and additional ways to assist our clients.  The meeting, held in Charlotte, was very productive and attended by over 80 NAI brokers from North Carolina, South Carolina, Tennessee and some from the DC area as well as New York.  In networking with these NAI brokers, the general consensus was that there are some sectors of the market that appear to be trying to gain some traction.  Most of this activity is user driven, and for properties that are both well located and reasonably priced.

Mark Everett, Broker, NAI Carolantic Realty

This is consistent with what I see in the Triangle market and includes various types of owner occupied buildings. I believe activity has picked up and the market is looking for ways to be re-energized.  If you have the need or desire to own your building, you can still get a deal done.  Financing is available for owner occupied real estate including traditional bank financing as well as SBA loans.  Couple that with available land parcels and favorable interest rates and it is a great time to purchase or build your own facility.  Give me a call and let’s see if I can help you ‘gain some traction’ in handling your real estate needs.