Raleigh's Downtown Office Market Tightens Up

Downtown has not had any new class A office space since the First Union tower and Two Hannover Square opened in 1991. Class A office demand has been met by developers converting old warehouses or upgrading class B structures, a trend that Robinson views as a "harbinger" of new building.

Reasons for the sluggish market include the high cost of land compared with the suburbs and low rental rates that are often more than $1 per sf foot below suburban areas such as Cary and West Raleigh. Estimates are that Downtown office space overall is down to a vacancy rate of anywhere from 3% to 5%.

"There's also been a growing number of restaurants, nightclubs and new construction of condos that has increased the vibrant nature of the Downtown area over the past several years," Robinson tells GlobeSt.com.

Some new condos in Downtown have been selling for $120 per sf. As for office rent, it has gone to the $16 per sf to the $19 per sf range, Robinson says.

First Union National Bank is also looking at leasing about two and a half floors in the 29-story First Union Capital Center tower, taking perhaps 50,000 sf, according to recent reports.

The 544,000-sf First Union tower, the largest multi-tenant office building in the Triangle, is anchored by First Union, accounting firm Deloitte and Touche, and law firm Womble Carlyle Sandridge & Rice.

Robinson is also marketing about 9,000 sf of office space in the nearby Fayetteville Street Mall. Rates are $15.50 per sf upstairs, and $17.50 per sf at street level.