Average asking class A rent in the 3.5-million-sf central business district submarket is $18.86 per sf; class B, $15.06 per sf. In the 34.9-million-sf suburban market, class A space is at $19.04 per sf; class B, 16.02 per sf. "The Triangle's average class A asking rate rose by 23 cents or 1.2% in the second quarter," notes Elizabeth Raiford, vice president of marketing and research at the independently owned and operated affiliate of Grubb & Ellis. Asking rates have increased for three consecutive quarters, rising by 2.3% since the third quarter of 2005.

Free rent and cash incentives are dwindling and many landlords are beginning to increase annual escalations. "Tenant improvement dollars remain a strong negotiating point, but they, too, will begin to wane over the next 12 months," Raiford predicts. As an example of the tightening office market, she points to second-quarter net absorption which surged to 363,346 sf compared to 77,661 sf in the first quarter.

Scant new construction also is a factor in rising rents. Only 908,006 sf of new product is under construction. Of that total, 43% is already preleased. The one building completed in the second quarter totaled 38,731 sf. "Large blocks of space have already become increasingly difficult to find," Raiford says. At the same time, demand from tenants needing 10,000 sf or more "has increased dramatically," she says. "As a result, market-wide asking rates will continue to climb in the coming months despite vacancy not yet having reach equilibrium."