The Karnes Triangle office inventory comprises multi-tenant office buildings for lease larger than 15,000 square feet located in Wake, Durham and Orange Counties. As of the third quarter of 2010, the Triangle office market contained 656 buildings totaling over 42 million square feet. The Keystone Centennial Science Center, which totaled 72,000 square feet, was the only new office building completed during the third quarter of 2010, while the 142,762-square-foot 9 Davis Drive building was removed from the for-lease inventory after it was purchased by Syngenta.
Approximately 7.72 million square feet, or 18.4%, of the Karnes office inventory was vacant during the third quarter of 2010. This rate was down 0.4% of a point from the historical high of 18.8% reported during the second quarter of 2010 as net absorption totaling 151,775 square feet outpaced new supply totaling 72,000 square feet. The removal of the 9 Davis Drive building, which had been fully vacant when purchased by Syngenta, also aided in reducing the region’s overall vacancy.
Demand during the third quarter of 2010, which totaled 151,775 square feet, was primarily derived from strong leasing in Cary, where net absorption totaled 115,212 square feet. Wake County Public Schools expanded into a total of 173,751 square feet at Crossroads Corporate Park during the third quarter and a shuffle of the park’s tenants to accommodate the move allowed for further renewals and expansions to occur during the third quarter. West Wake, which reported the only new completion during the quarter, ranked third in terms of overall net demand with the 72,000-square-foot Keystone Centennial Science Center delivered more than half occupied by Advanced Instrumental Systems (34,015 square feet), All Systems Broadband (4,708 square feet), and Pentair Water Pool & Spa (1,171 square feet).
After averaging approximately 1.74 million square feet of new office construction per year between 2007 and 2009, the Triangle market delivered only 220,725 square feet of new office space during the first nine months of 2010. With under construction office space totaling less than 100,000 square feet during the third quarter of 2010, the Triangle office market will likely report its lowest annual level of new office construction since Karnes began tracking the market in 1996. The Triangle office market has averaged more than 1.5 million square feet of new office construction in every year since 1996, with the lowest level reported in 2003 when 443,416 square feet was delivered. While this lack of supply-side pressure continues to be a welcome sign for the local economy, a more encouraging sign will be leasing activity on the more than 7.7 million square feet of vacant inventory. Recent announcements such as Duke Medicine’s 60,192-square-foot lease at Riverbrich and Inspire Pharmaceuticals’ 42,854-square-foot lease at Brier Creek Corporate Center #6 are the more encouraging signs that the Triangle market will continue to slowly recover through 2011.
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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.