Office demand growing in amenity-rich spots like North Hills, Kane Realty says
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Kane Realty's One North Hills tower. Photo: Kane Realty
The Triangle's overall office vacancy rate might be hovering around 21%, but developer Kane Realty is hearing from a growing number of tenants looking for space, says Bonner Gaylord, the firm's chief operating officer.
Why it matters: Kane Realty is one of the Triangle's most prolific developers, with a portfolio of office, retail and apartment buildings stretching from North Hills, which it has turned into one of the region's most popular live-work-play destinations, to downtown Raleigh.
What they're saying: Kane's heard from potential tenants seeking close to a million square feet of space total, Gaylord told Axios. "It's really the most significant pipeline of prospects we've ever had."
- Most of that activity has come since November, Gaylord said. "I think the market desires certainty, and so with the uncertainty of the election everybody pauses and waits to see how everything's going to shake out."
- Touring activity set a record for the company the second week after the election, he added. "Then in the beginning of January, we had a huge influx of new prospects."
Of the potential prospects for space, 55% are from out-of-state companies, he said, citing internal Kane Realty data.
- Raleigh, he noted, has mostly been competing with markets like South Florida, Tampa, Atlanta, Dallas and Nashville for potential tenants.
State of play: An influx of tenants would be welcome news for the Triangle's office market as well as Kane Realty, which opened three new office buildings in North Hills last year — and is still trying to get its ambitious Downtown South project off the ground.
- Gaylord said he believes Kane is well positioned in North Hills to continue signing new leases thanks to the huge investments the company has made in building retail and apartments around its office buildings there.
- The company's Main District and Innovation District expansions have added dozens of new retailers in the past year, including an RH Gallery and restaurants like the Village Tavern.
- "The major trend is [office tenants] moving in from suburban office parks that are not walkable, not amenitized and not enjoyable environments to be in," Gaylord said, noting that's been a benefit for its properties in North Hills.
By the numbers: Gaylord said, excluding newly opened buildings, Kane's North Hills office buildings have an extremely low vacancy rate of 3.8%. Its newer buildings still have plenty of space for potential tenants.
- One North Hills, a 10-story tower, opened last summer and has signed leases from several companies, including Jewelers Mutual and JT International. Around 33% of its office space is still available, according to LoopNet.
- The adjacent 4114 Center building has signed several retail and restaurant tenants, but most of its office space is still vacant.
- At the North Hills Innovation District, the recently opened Tower 5 has signed a large lease with clinical research company Parexel. But around 80% of the 17-story tower is still available, according to LoopNet.
What's next: Kane Realty doesn't have plans to start construction on another office building in North Hills, but the company is expected to begin construction on two new residential buildings this year:
- The Strand, a 20-story apartment building with 362 units next to the Advance Auto Parts tower.
- The Tributary, a 6-story apartment building with more than 300 units next to Tower 5.
Gaylord said that the company is also looking closely at adding more hotel space to North Hills.
- "We really need more hotels and we are investigating that," he said.