‘Flight to quality’: Tenants flock to new office space in Raleigh’s Smoky Hollow
A software company has relocated its East Coast hub from a downtown coworking space to Raleigh’s Smoky Hollow district.
Amid a “flight to quality” trend, Utah-based Lucid Software has leased 10,000 square feet in the Class A “top-of-the-line” mixed-use building at 21 N. Harrington St., just east of Glenwood South.
In a soft office market where deals are slow and vacancies remain at record highs, it’s another example where newer properties have attracted the lion’s share of demand.
“The workspaces and urban conveniences make it the perfect home for our next phase of growth,” said Kat Judd, chief people officer at Lucid Software, in a release.
The nine-story, 225,000-square-foot building opened in 2021. Since then, Kane Realty — one of Raleigh’s most prolific developers — has announced a string of new office tenants for the complex, including consulting firm Scalene Design and environmental engineering and construction services firm Brown and Caldwell. The firms occupy the third and fourth floors, respectively. The building is 60% leased, Kane Realty said.
Among the amenities: a large conference area, open-space work areas, outdoor terraces and a bicycle center. Restaurants and retail are also at the doorstep.
The ground-floor retail space — around 45,000 square feet — is fully leased, according to the firm. The lineup includes restaurants Madre, Midwood Smokehouse, Barrio Tacos and Tucker Street Diner; entertainment and bar spots The Crunkleton and Neighborhood; and other businesses like Hone-Sharpen culinary studio, Dose Yoga + Smoothie Bar, Jetset Pilates and Hush salon.
Peace Raleigh Apartments is also next door above downtown’s first Publix grocery store.
Smoky Hollow offers “a lifestyle-oriented work experience,” said Hooker Manning, director of office leasing at Kane Realty.
A bright spot in bleak market
The newly inked deal is a positive sign in an otherwise tough landscape, say experts. Amid the rise of remote work, commercial real estate is struggling, both nationally and in the Triangle.
In Raleigh-Durham, direct vacancy rose to 17.4%, according to CBRE’s 2024 third-quarter market report. That’s up .9 percentage points for the quarter and 3.1 points (from 14.3%) year over year.
Overall vacancy rose to 20.6%, up 0.8 percentage points for the quarter and 1.8 points year over year.
On the plus side: Leasing activity has increased in recent months, the report said.
“Although the predominant trend continues to be tenants shrinking their footprints upon renewal or relocation, there has been an uptick in tenants choosing the region for expansion or relocation following multi-market searches,” CBRE senior research analyst Elizabeth Gates said in the report.
The recovery is expected to be protracted, she added. But overall, “fundamentals should begin heading in a more positive direction in 2025.”
The average Class A rate fell to $32.76 per square foot, down 2.1% year over year, and the average Class B fell 2.7% to $25.82 per square foot.
This story was originally published December 3, 2024 at 1:11 PM with the headline "‘Flight to quality’: Tenants flock to new office space in Raleigh’s Smoky Hollow."
