|NCCMLS Market Update - Commercial Real Estate Market Statistics|
Another Market Update by NCCMLS
The Movie Too Big To Fail premiered May23rd on HBO, a testament to the apocalypse of the financial legacy of the United States. The crash of Bear Sterns, bankruptcy of Lehman Brothers, destruction of hope to achieve the American Dream for many.
But the post financial apocalypse of the US doesn’t need a movie to be reminded of the disaster. Even the cities seen following the after math as the most likely to succeed are facing challenges today of a weak financial industry and ever recovering consumer, and never stabilizing real estate market.
Raleigh is no exception. While Charlotte was perceived to see the worst of the Banking Sector, Raleigh faced high vacancies as Wachovia fell to the hands of Wells Fargo & Company (NYSE:WFC). But for Raleigh, the fallout continues as RBC Bank (USA), whose name has graced the market on the RBC Center, home of the Hurricanes, and Raleigh’s Highwoods Properties, Inc. (NYSE:HIW) RBC Tower in downtown Raleigh, is on the auction block as its US division has failed to produce income with a high mortgage default rate of nearly 7%.
But Wachovia and RBC aren’t the only big losers for Raleigh. Progress Energy, Inc. (NYSE:PGN) whose Q1 income dropped by $184 Million is currently working out a merger with Duke Energy Corporation (NYSE:DUK), forming one of the largest monopoly’s in the United States and will be headquartered in Charlotte, effectively adding to Raleigh’s office vacancy woes.
But office isn’t the only fallout in the Triangle. The Kroger Co. (NYSE:KR) who has posted modest earnings plans to close yet another Raleigh location in Wakefield Commons shopping center. The announcement came just 1 week after debt struggling Centro Properties (PINK:CEOPF) of Australia (who still owns another 23 Properties in North Carolina) sold the center to Westdale real estate Investments of Dallas, TX. However, Westdale claims to have acquired the property as a distressed asset at a significant discount and dismissed concerns over losing the tenant.
Glenwood Avenue pre financial crisis was Raleigh predominate high-end retail and office location, once drawing significant rates simply for a Glenwood address. Although Crabtree Valley Mall has continued to thrive, the recent Foreclosure of the non-existent Crabtree Tower, illustrates just how weak the Glenwood corridor remains. Crabtree Tower, once a Sheraton Hotel, currently stands as a vacant slab occupied by no more than overgrown weeds and shrubs.
But not all news is bad news for Raleigh. In Q1 2011 office vacancies dropped to 12.3% according to CoStar Group, Inc. (NASDAQ:CSGP):
Class-A projects reported a vacancy rate of 14.8% at the end of the first quarter 2011, 15.3% at the end of the fourth quarter 2010, 15.7% at the end of the third quarter 2010, and 16.3% at the end of the second quarter 2010.
Class-B projects reported a vacancy rate of 12.4% at the end of the first quarter 2011, 12.4% at the end of the fourth quarter 2010, 12.7% at the end of the third quarter 2010, and 12.9% at the end of the second quarter 2010.
Class-C projects reported a vacancy rate of 6.5% at the end of the first quarter 2011, 6.5% at the end of fourth quarter 2010, 6.3% at the end of the third quarter 2010, and 6.8% at the end of the second quarter 2010.
Once known for having the highest vacancy rates in the Country, the RTP market is now one of the healthiest as industrial and warehouse properties continue to see occupancy improvements with a Q1 vacancy rate of 10.1%. The RTP corridor accounts for approximately 50% of the Raleigh/Durham industrial market with nearly 18 Million Square Feet of industrial space.
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