Tenants flock to Class A office space in Raleigh’s North Hills but market remains tough
Two tenants have leased 31,659 square feet of Class A ”top-of-the-line” office space at the Bank of America Tower in Raleigh’s North Hills.
The newly inked deals include a new “large-footprint tenant” and a renewal and expansion of an existing tenant inside the 18-story, mixed-use building along Six Forks Road and Interstate 440.
In a soft market where deals are slow and vacancies remain at record highs, some experts are hopeful it’s a sign that the Triangle commercial real estate market is finally turning a corner.
“The transactions highlight the strength of the North Hills office market,” said Marc DeLuca, CEO and regional president for KBS, in a release.
KBS owns the building with Raleigh-based Kane Realty Corporation. The tower opened in 2016 and is classified Class A based on a number of factors, including location and amenities. The building features 10 floors totaling 300,000 square feet of office space. Street-level retail is also on offer with two restaurants, The Capital Grille and STIR.
Brightly Software, a Siemens company that creates asset management software, will occupy an entire 28,658-square-feet floor. The new office will also serve as the global headquarters for Siemens Industry, Inc.
“By creating one space for both companies [under the same roof], we’re improving our sustainability,” said Stephanie Dorsey, CEO Siemens Real Estate Americas.
The other lease is an expansion of existing tenant Eva Garland Consulting (EGC), which added more than 3,000 square feet to expand their current space, now totaling nearly 15,000 square feet.
“Growing companies are gravitating toward high-quality office space that include active retail, restaurant and entertainment,” Deluca said. In an era of hybrid work, “it supports their efforts to attract and retain the best employees,” he said.
Experts say it’s a positive sign in an otherwise tough landscape. Both nationally and in the Triangle, commercial real estate is hurting.
In Raleigh-Durham, direct vacancy rose to 16.5%, according to CBRE’s 2024 second-quarter Raleigh-Durham market report. That’s up from 15.7% for the quarter and from 13.6% year-over-year.
Overall vacancy rose to 19.8%, up half a percentage point for the quarter and 1.5 percentage points year-over-year, the report said.
Leasing activity has “increased somewhat in recent months,” said CBRE’s senior research analyst Elizabeth Gates in the report. But the prevailing trends continue to be tenants “renewing or upgrading to smaller footprints upon relocation,” she said.
Owners of trophy properties continue to push asking rental rates higher after a decline in the middle of 2023, according to Avison Young’s second-quarter report.
“[That] suggests the [post-pandemic] trend of uncertainty is a thing of past, replaced with stable more consistent year-over-year figures,” the report said.
The average Class A asking rate declined 0.7% quarter-over-quarter to $33.05 per square foot.
This story was originally published October 7, 2024 at 7:00 AM with the headline "Tenants flock to Class A office space in Raleigh’s North Hills but market remains tough."
