There is still a lot of vacancy in the Raleigh/Durham, North Carolina, office market, according to Nellie Shipley, an attorney with Womble Carlyle Sandridge & Rice, PLLC.

“Tenants have much more bargaining power than they have had in a while, but I think they are surprised that they don’t have even more,” she says. “The lower interest rates have kept landlords from getting desperate, even with higher than normal vacancy rates in their buildings. So while landlords are willing to bargain more than they did a few years ago, and while rental rates are falling, tenants aren’t getting everything on their wish lists and are perhaps a bit more optimistic about what should go on those wish lists than they ought to be.”

Landlords, on the other hand, need to be careful when renewing leases and signing new ones. “While interest rates have allowed them to operate buildings half-empty, they know that interest rates will eventually go up,” says Shipley. “And despite their unwillingness to hand over everything the tenants are asking for, I think they are feeling the pressure to get space filled. They need to be careful that they don’t lock in too many tenants for too long at rates that won’t keep up when interest rates start to rise. In fact, even just rising rental rates (whether accompanied by higher interest rates or not) over the next few years will create problems for landlords that fill up their space now with cheap, long-term rents — getting loans on and selling their buildings will be more difficult.”

New space is coming on line in Raleigh (the Progress Energy development, for instance) and Durham (the American Tobacco Project, for instance). Many surrounding towns also have downtown development initiatives to promote more development, including office space. Those downtown developments are envisioned as mixed-use, so the office growth ideally would be accompanied by residential and retail development as well. That will lead to a different flavor of office experience for many of the tenants.

Transportation systems located near mixed-use developments may change how workers live, work and play in the Triangle. An example of this is the planned Triangle Transit Authority’s 35-mile rail system that will include 16 rail stations.

“I don’t think that will happen immediately because there are so many pieces of that puzzle that need to fall into place,” Shipley says. “But I think there are some real opportunities for more of us to experience more of a mix of uses in the next 5 years or so.”

“I think bio-tech and the industries that support bio-tech are going to drive a significant portion of the action in real estate in the near future,” Shipley notes. “Communications technology firms may continue to suffer from overbuilding of infrastructure for a while, but healthcare, including health research, seems to be going strong and attracting a lot of attention, both in terms of private investors and those involved in economic development. The Research Triangle Park would be an obvious place to look for emerging and growing bio-tech, but I don’t think we should ignore that lots of industries that support bio-tech can and probably will be located throughout the Triangle and maybe even a little outside of it.”

Major Redevelopment Planned for Raleigh Office Building

Over the past 5 years, Raleigh developers have been working hard and competing for projects to redevelop the downtown submarket. Many old warehouse and office buildings have been modified and renewed to mixed-use facilities containing office, retail and upscale residential condominiums. Prime examples include 510 Glenwood and the former Pine State Creamery. The old Hudson Belk building is underway as well as Progress Energy’s redevelopment plans for one downtown city block.

Coldwell Banker Commercial TradeMark Properties and its principal Billie Redmond have seized a strong redevelopment opportunity in the former Occidental Life building located in the well-known Cameron Village area, just minutes from downtown.

The Occidental was originally built in 1955 as one of the first headquarters buildings in Raleigh. During its heyday, large ground lights highlighted the limestone exterior of the 60,000-square-foot building.

A large-scale redevelopment that included tearing down the historic building was planned for the site, but with strong neighborhood opposition to density, Raleigh City Council did not advance.

One of Coldwell Banker Commercial TradeMark Properties’ clients picked up the contract on the stand-alone Occidental building and created a redevelopment plan with Crosland, which is developing the vacant land to include 375 upscale condos. The plan was approved after 2 years of work, and the building met approval for the federal historical register.

“To preserve its historical nature, we plan to bring the building back to its original status as developed in 1955,” says Redmond. “This involves recreating the original entrance facing Wade Avenue and completely restoring the building’s exterior and interior systems such as mechanical, plumbing and electrical.”

The site plan includes adding more surface parking, and at the same time, keeping many of the prestigious oak trees that line the site. Saving the trees was critical for the neighborhood approval. Other improvements will include restoring the lobby, hallway and bathrooms, sealing the existing windows, installing high-speed communications and a card-key security system, and replacing and upgrading the landscaping.

“We will bring it up to Class A status,” says Brian Farmer, vice president of commercial leasing for Coldwell Banker Commercial TradeMark Properties.

Coldwell Banker Commercial TradeMark Properties will manage and lease the building. Local architect Michael Weeks helped kick-start the historic designation process and Clancy & Theys is named as general contractor for the renovations.

The Occidental building is now 75 percent pre-leased, and construction will begin this summer. A restaurant will be located on the first floor, and Coldwell Banker Commercial TradeMark Properties and another local real estate firm will occupy a large part of the office space.

©2003 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.