09 Jun NC land development markets with our partner Lee & Associates
This June, our Director of Land Development Brock Storrusten caught up with Moss Withers, SIOR, MBA, President & Principal at Lee & Associates. They talked about emerging sectors and trends, continuing supply chain challenges, geographic submarkets, and rising interest in outdoor spaces. Read on for Moss’ NC land development insights.
Brock M. Storrusten: Hi Moss, it’s always great to talk to you. Are you still up for answering a few questions on the North Carolina marketplace?
Moss Withers: Thanks Brock! We are excited to have the opportunity to do this!
BMS: What is your outlook for office market in the Triangle in 2021? In 2022? In North Carolina at large?
MW: Similar to the question “do you own any bitcoin?” this is a question that comes up in every real estate conversation. I do want to mention that I consider myself an optimist, so there may be some optimistic bias in this comment, but I am confident in OUR office market. What we are seeing is that the national-level office market is in trouble. These recent events have proved that office users can be more efficient and can effectively become as efficient on the operating side with a bit less office space.
An example we are seeing more and more would be a company leaving another market to come to the Raleigh–Durham area. They may be looking for 10,000 SF of office, which is a net gain for our area. The backstory though is that they were in 25,000 SF in Philadelphia and are going to be vacating that space. We are constantly in conversations with new companies moving in from the Northeast looking to relocate to our area. My concern would be for those areas they are leaving.
If the question is focused around our market, I think there was a year-long pause, but we are back up and running. One area we are watching closely is downtown Raleigh. In a conversation had with several other brokers in our market, it was shared that there has only been one 5,000 SF direct lease signed in the past year in the central business district of Raleigh. That is not sustainable, and with this data, many of these “coming soon” projects will never make it to market. Overall, believe it or not, office rents are higher now than they were one year ago.
BMS: How will the push for outdoor spaces affect indoor spaces?
MW: Even in our office, we are seeing an interest in finding outdoor areas where Wi-Fi is available. It seems most want to still be at the office, but also have the ability to expand to other areas–even outdoors. I don’t think that outdoor demand will change the need for indoor square footage. That will be affected by those types of businesses that can be effective with a work-from-home concept.
BMS: How will construction costs and supply influence development in the next couple of years?
MW: If you are asking my biggest concern, this is it. The cost of materials due to the supply chain is brutal on new construction. Steel, wood, insulation, and other construction material pricing is out of control and not sustainable. For those that are already in the building process, they are stuck and pushing forward. For those still in the entitlement phase, we are seeing projects pause or slow in a hope that pricing will come back down. From what I am hearing, that is not going to be the case anytime soon. These prices are pushing rents to levels that our market is not comfortable with (yet). We are hearing some unique ideas be considered for alternative materials like tilt-up concrete, but this is not a proven solution yet.
BMS: With the changing marketplace, do you see any changes in the sectors of the market we track, i.e. any new trends/sectors that may emerge or submarkets that may be tracked?
MW: Our area is on fire when it comes to life science. We are the 5th largest node for life science in the country and growing rapidly. There is new construction taking place, but a lot of this inventory coming to market is actually converted flex space. Within the past 12 months we have seen more than 2.5 million square feet of flex transition into life science.
What that has done is put a huge stress on remaining flex space. Rents have jumped over $2 per foot in the past 24 months and will continue to rise. Developers see this trend and are looking to develop more flex, but industrial zoning is limited and opportunities are minimal. Pair that with the comments on development material costs, and we have more hurdles that need to be jumped to keep supply up with demand. Rents will continue to rise.
BMS: What are the hot geographic submarkets in the Triangle, Triad, and/or coastal markets?
MW: This question is dependent on what we are discussing. For residential, look at markets including Angier, Sanford, Willow Springs, Smithfield, Mebane, Pittsboro, and Youngsville. In regards to mixed-use areas, keep an eye on Chatham Park. I know y’all are fully entrenched there, but the demand is much higher to be a part of this project than anyone fully understands. The Preston team will be successful there and it’s already showing. Life science demand wants to be near RTP. Warehouse? Anywhere we can find zoning! Office? Anywhere with walkability to provide amenities to their tenants outside of the building.
BMS: What is the number one takeaway from 2020 and how can that be leveraged by the development community?
MW: There are still black swans in our industry. No one expected a pandemic, but here we are. Be ready for anything. In regards to where we are, we are lucky. Raleigh–Durham faired this hurdle very well. Be ready for the continued demand from outside of our market.
BMS: What is your silver lining personally during this challenging time period?
MW: Businesses were looking for an excuse to take the next step of considering a move or expansion into our market. This pandemic gave these companies time to consider and ultimately take the next step to move to our market. We will continue to see this over the next several years. We are in a great place with incredible talent. We are very fortunate.
BMS: That’s awesome! Thanks very much for taking the time to share your perspective.
MW: Lee & Associates is honored to be a partner with WithersRavenel, and we look forward to the continued friendship. It’s humbling, but in just over 2.5 years our team has grown to 35, including 25 commercial real estate brokers handling every aspect of commercial real estate needs as well as property management―closing in on 2 million square feet of management. Please let us know if there is anything our team can do to assist you and your clients!
Lee & Associates is the largest broker-owned firm in North America. They have been providing seamless, consistent execution and value-driven market-to-market services for clients since 1979.
Moss Withers, SIOR, MBA is the founding President of Lee & Associates, Raleigh-Durham. He began his brokerage career at NAI Carolantic and quickly established himself as a leader in the Triangle’s commercial real estate market. Moss has completed over 650 transactions ranging from large land assemblages, to office sales and leasing, to investment properties.
For brokerage services, including the acquisition, disposition, or leasing of commercial property, contact Moss at (919) 576-2501 or firstname.lastname@example.org.
For assistance with zoning and entitlements, civil site development, and environmental due diligence, reach out to Brock Storrusten at (919) 515-5179 or email@example.com to get connected with a Land Development & Planning specialist.