As of the second quarter of 2010, the KARNES Triangle office market totaled over 42.1 million square feet of for-lease buildings greater than 15,000 square feet in size. Approximately 7.9 million square feet, or 18.8%, of the office inventory was vacant during the second quarter. Two new office buildings totaling 62,225 square feet were delivered during the second quarter, while five existing buildings totaling 737,000 square feet were added to the Karnes inventory. Among the existing buildings added were the four buildings at Network Center, a 676,000-square-foot former Nortel office park. The park, which is home to Fidelity, added 456,745 square feet of vacant space to the I-40/RTP inventory when added.
At 18.8%, the Triangle’s second quarter 2010 vacancy rate was 0.5% points higher than the 18.3% reported in the first quarter of 2010. Although net absorption totaling 126,441 square feet during the quarter outpaced new completions totaling 62,225 square feet, the addition of 456,745 square feet of vacant space at the Network Center office park prevented potential improvements in the regional vacancy rate.
Net absorption during the second quarter of 2010, which totaled 126,441 square feet was primarily derived from strong leasing in West Wake, Northwest Wake and Northeast Wake, where a total of 136,755 square feet of positive net demand was reported. The largest new occupancy during the quarter was reported in the Northeast Wake submarket, where BB&T occupied 30,600 square feet at Highwoods Tower One.
After averaging over 1.7 million square feet of new office construction per year between 2007 and 2009, the Triangle office market is poised for a reprieve during 2010. A total of 148,725 square feet of new space was delivered during the first six months of 2010 and only 170,844 square feet in five projects was under construction as of the second quarter. Smaller sized projects and in diversified locations comprising the under construction inventory should mitigate supply-side pressures and allow for the absorption of excess vacant space during the remainder of 2010.
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The KARNES Triangle reports have been produced for 15 years and contain detailed information on vacancy, absorption, completion, and rental trends. The reports also include breakdowns by submarket as well as tenant activity details and development lists.