Midtown vs. Downtown

[raleighdeveloper]

High velocity construction! It’s the trim out that will take time depending on what the tenant wants done to the space

[kjhburg]

https://www.bizjournals.com/triangle/news/2025/02/28/raleigh-office-space-downtown-north-hills-amenity.html
““In 2024, the North Hills/Midtown submarket saw high demand for office space resulting in 419,395 square feet of office space being leased, according to CoStar data. So much office space was signed, compared to companies moving out of office space, that there was a positive net absorption for the year, a remarkable achievement in a time when landlords are scrambling to fill buildings.”” from the Biz Journal article

[John]

Yeah, but isn’t most of that submarket new? How do folks move out of new inventory?

[kjhburg]

this was looking at the entire North Hills Midtown office market which does include older buildings. The new buildings are getting the most new leases.
Overall the article says North Hills is very strong competition for downtown especially in new to market tenants because they like the live work shop dine aspect of NH. This is where downtown really needs to the restaurants and so forth (an independent retail businesses) as this is considered an amenity today for office workers.

[dtraleigh]

I thought I read that this trend is called “move to quality” where office tenants can take advantage of competitive rates and move up to nicer (ie newer) spaces.

Raleigh is poised to keep growing so I imagine downtown will get more tenants over time.

[kjhburg]

Yes downtown should get some new tenants. There is just more new office space in North Hills Midtown area right now. There is certainly a flight to quality that is why things like Highwoods renovations at 150 Fayetteville tower aka Wells Fargo tower is important as that helps. With no new office space started in the last 2 years in Raleigh and none breaking ground soon all this excess office space will be absorbed which down the road will need to more new construction.

[trueurbanist]

Hopefully in places like The Creamery development and Smoky Hollow Phase 4-5

[kjhburg]

Yes I do think Kane will be the one for the next office building downtown at Smoky Hollow. I am hopeful of the Creamery’s office building but it will need an anchor tenant to get it started more than likely. However they can build the apartment tower without it for now.

[rucker]

Very interesting dynamic playing out with office. All of the good space will be taken within the next 12-18 months but you need rents approaching $60 psf to build new urban product in today’s environment. Nobody is going to spec until those rents get proven out and there is less than 10% vacancy. Will likely see things get very tight with huge rental rate increases in the medium term. We are at least 3 years out from seeing a new office building of significance deliver.

[kjhburg]

Here is the best office space available Downtown either the newest or the building is recently renovated as in 150 Fayetteville St aka Wells Fargo.
91,000 sq ft available in 421 N Harrington 225,000 9 story building leaving over half this building available in brand new space.
84,000 sq ft available in 150 Fayetteville St 29 story 560,000 sq ft building
150,000 sq ft 400H new office space about 10,000 sq ft leased leaving 140,000 sq ft brand new space.