The Present, Past and Future of the Triad Region Commercial Real Estate Industry | Brand Avenue Studios
Around the world, business has changed dramatically over the past two years. The same can be said of commercial real estate in the Triad area, particularly the office, retail and industrial sectors in Greensboro, Winston-Salem and High Point. While the way forward is not easy, all three areas are showing improvement and have exceeded expectations.
Triad office space
Currently, the office vacancy rate in the Triad district is 13.7%. Despite the increase in the vacancy rate quarter over quarter, average asking rates increased to $ 16.90 per square foot. Construction of new offices was limited to infill projects such as 400 Bellmeade in Greensboro, Bailey South in Winston-Salem and The Outfields in High Point.
“Office fundamentals have remained stable, in large part because the majority of tenants choose to make short-term decisions with lease extensions,” said Greg Wilson, executive vice president of CBRE | Triad. CBRE is the world’s largest commercial real estate services company.
“Landlords have been able to maintain tenant rates with shorter term extensions while mitigating capital expenditures, such as rental commissions and leasehold improvement allowances,” Wilson said.
Triade sales area
The retail market in the Triad area is doing better than office space. Quarter over quarter, the vacancy rate increased to 6.95%, with 101,000 square feet of retail construction currently underway. Despite 117,000 square feet of negative net absorption in the first half of this year, the average asking rate per square foot of retail space increased nearly 3% to $ 12.10 since the start of the year. A negative net absorption means that more commercial space has been released and brought to the market than it has been leased.
“The Triad’s retail market has been heavily impacted by the effects of COVID-19. Stores and restaurants were closed for a long time which impacted profitability and in some cases resulted in permanent closure. Stores and restaurants that have remained open have had to adapt in different ways, which should prepare them for any long-term effects that may result from the pandemic, as well as give them a guide on how to deal with future downturns. We see that activity continues to increase in our market, with interest not only from businesses but also from developers, which gives us hope for a strong retail market in the future, ”said Matt King. , vice president of CBRE | Triad.
Triade industrial space
The industrial sector continues to show the strongest activity on the Triad market. There is currently 6.1 million square feet of industrial construction underway, including 3.0 million square feet of speculative development. During the third quarter of this year, the market experienced a net absorption of 131,000 square feet, marking the twelfth consecutive quarter of positive net absorption for the Triad industrial market. As vacancy continues to tighten with a current rate of 5.0%, average asking rates are climbing in the third quarter, increasing quarter-over-quarter by 1.97% to $ 4.92.
Impact of COVID-19
COVID has impacted the activity of the industrial, commercial and office sectors of the Triad. Stores, offices and restaurants have been closed for a long time, with some permanently closed. Supply chains, which are still impacted, have been hit hard by COVID, but it has also spurred growth and demand in the industrial sector.
According to Dodson Schenck, general manager of industrial services at CBRE Triad and Raleigh, “The Triad market continues to see demand from tenants and investors who wish to enter or grow in our market. Many companies have expanded their warehouse operations, domestic or North American manufacturing, and invested in their supply chain to avoid future problems. We expect this growth to continue in our market, tightening the overall vacancy rate and pushing up rental rates. “
The outlook for the main sectors of the Triad can be characterized as cautiously optimistic. The three sectors should eventually stabilize and regain strong profitability, particularly in industrial and commercial areas. Many developers are looking for the redevelopment of existing spaces or new construction, as commercial spaces see more traffic, companies look for new opportunities and the demands and fundamentals of the industrial sector increase.
The office sector may have the most difficult way forward, but the increase in activity in the last quarter has shown signs of recovery in the sector.
“The exit from COVID-19 will be bumpy unless there is increased demand for office space as the world returns to normal,” Wilson said. “However, with minimal new construction on the horizon, the market is expected to stabilize over the next 18 to 36 months as the world returns to a new post-COVID normal.”