Raleigh's largest office landlord raises its big bet on the city
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Advance Auto Parts tower in the North Hills area of Raleigh. Photo: Courtesy of Kane Realty
Raleigh's largest office landlord, Highwoods Properties, is once again making a large bet on the city.
Why it matters: Highwoods disclosed this week that it bought the Advance Auto Parts Tower in the North Hills area of Raleigh for $138 million— a building that is 100% leased and was built in a partnership of Raleigh developer Kane Realty and Lionstone Investments.
- The building is near the Captrust Tower, which Highwoods bought in 2021 for $142 million.
Driving the news: Highwoods, which owns properties across the Southeast, now controls multiple office towers in North Hills and downtown Raleigh, where it is trying to rejuvenate Fayetteville Street.
Zoom in: Opened in the fall of 2020, the 20-story Advance Auto Parts Tower has nearly 350,000 square feet of office space and eight floors of parking.
- The building's main tenant is Advance Auto Parts, one of Raleigh's two Fortune 500 companies. Other tenants include IAT Insurance Group, the tech company Relay and the Indian restaurant Tamasha.
State of play: The sale comes at a time when vacancy rates in the Triangle's office market hover around 21% — a record high.
- But Brian Leary, Highwoods' chief operating officer, said that number doesn't mean the office market is struggling.
What they're saying: "While some have noted that Raleigh's office market has been struggling, I would argue what it has been doing is separating, not necessarily struggling," Leary told Axios.
- Office towers in walkable districts with access to amenities are in demand, he noted, while more suburban offices without nearby amenities "might be doing worse than struggling."
- North Hills, especially, Leary noted, offers office workers a multitude of nearby shops and restaurants.
The big picture: The sale could be a sign of an office market that is beginning to thaw from the effects of COVID-19 remote work trends.
- The volume of office building sales was up 20% last year, and transactions are expected to increase this year, the Wall Street Journal recently reported.
Companies are also beginning to look for more office space, especially in newer buildings with more amenities, the New York Times noted, as work-from-home policies change.
- That tracks with what Kane Realty reported this year when it said the number of prospective tenants had increased significantly.