Another Record Year of Construction Predicted for the Triangle Region at 35th Annual Triangle Commercial Real Estate Conference

RALEIGH, N.C., Jan. 23, 2020 /PRNewswire/ -- All signs point to a good year ahead for the area's overall economy and commercial real estate markets. That was the message conveyed at the 35^th Annual Triangle Commercial Real Estate Conference on Wednesday evening, where over 1,600 of the area's business, government and community leaders gathered in Raleigh's PNC Arena to consider the health and direction of the local economy in the coming year. Hosted by Tri Properties | NAI Carolantic Realty, the conference is considered the authoritative "state-of-the-market" report on the Triangle's real estate sector. Findings presented at the conference provide an important bellwether of the region's general economic vitality.

The Conference theme was "Celebrating a Legacy," of influence and growth having held the first conference in 1985 in a small hotel meeting room in Downtown Raleigh. Today, NAI Carolantic's research was based in part on a survey of over 285 million square feet of office, multipurpose and retail space comprising 8,500 buildings.

"The overall market was healthy last year and will likely remain so in 2020," said Jimmy Barnes, SIOR, President of NAI Carolantic. Vacancy was down in virtually all categories of the multipurpose, shopping center and office categories." Among statistics that Barnes cited for 2019: Four office submarkets remained in single digits. Only RTP and Downtown Durham were over 10%. Office rents also continued an upward climb due to increased demand and construction costs. The retail market experienced overall positive absorption and vacancy remained steady at 3%. The multipurpose (industrial/warehouse/flex) sector reported another year of historically low vacancy at approximately 7%. The Triangle apartment market still saw strong absorption and vacancy rates actually dropped to 4.9%, the lowest in 20 years.    

Giving his forecast on the Outlook for Income Property, Barnes noted, "We expect steady market demand will keep cap rates compressed and there is a strong upside in purchasing existing properties, especially in the industrial sector given the gap in rental rates for new product. The industrial sector is still leading the way, fueled in part by demand for products for the residential construction industry and same-day "last mile" delivery requirements of E-commerce."

In his market recap, Barnes noted the industrial sector already has over 3.3 million square feet underway which is 40% more than was built in 2019. The office market will also have another record year of construction surpassing 2019 with 3.1 million square feet already underway. With all the new construction, Barnes expects overall office vacancy to rise to double-digits by the end of 2020.

Headed into 2020, Barnes predicts the shopping center category will also have another big construction year, almost double the amount already underway. However, he expects vacancy to remain at approximately 4% with most new construction already preleased. Retail developers and owners continue to navigate the ever-changing retail market with food and beverage, health and fitness as well as coworking space to become prominent tenants.

The investor outlook for land is positive with multifamily land at a premium, as apartment vacancy remains historically low. Industrial land costs will continue to rise in preferred locations which is driving development to surrounding areas, still with good access to I-540. Diminishing office land is leading to redevelopment opportunities of existing facilities. Residential land activity is also increasing in surrounding areas due to difficulty getting projects approved in core areas.

Barnes concluded with, "Strong job growth drives our community and with continued hard work by our elected officials and economic development teams, this trend will continue. We are in a great place and the future continues to be bright."

Conference sponsors included:  Bobbitt Design Build; celito.net; DMJ & Co., PLLC; JDavis; Manning Fulton & Skinner, P.A.; TriSure; Wells Fargo and WithersRavenel.

SOURCE Tri Properties; NAI Carolantic Realty