Rents Rise as Space Tightens in Triangle

RALEIGH, NC-Class A and class B office tenants in the 38.5-million-sf Raleigh-Durham market are preparing for rent sticker shock in the coming quarters because of a tightening inventory of space, according to a new analysis by the Raleigh office of Grubb & Ellis/Thomas Linderman Graham.

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.