In the last 6 to 8 months, new office development in the Greensboro/ High Point/Winston-Salem, North Carolina, market has virtually come to a standstill. Several projects started in early 2001 have come on line but with very little positive leasing activity.

“With the current overall office vacancy rate at around 18 percent and a growing amount of sublease inventory, office developers see very little demand for speculative development,” says Mark Caudill, executive vice president of Commercial Carolina Corporation in Winston-Salem.

Three major tenants will be vacating large blocks of space over the next year to year and a half in Winston-Salem. Wachovia Bank has announced that it will be vacating up to 640,000 square feet of space in the central business district (CBD). This is part of Wachovia’s re-stacking plan as a result of the merger with First Union in Charlotte. Sara Lee Corporation recently announced that it will be constructing new space in its Oak Summit campus, resulting in major vacancies in the Madison Park office complex in the North submarket. Also at Madison Park, the status of US Airways space is in question as a result of the company’s bankruptcy filing. These events will greatly affect the need for any future development in the CBD and North submarkets.

In the Greensboro/High Point area, there are virtually no immediate development plans, says Caudill. “Most submarkets, and especially the Airport submarket, are dealing with a glut of sublease space in addition to the overall vacancy rate of about 18 percent,” he continues. “There are no known plans for major office development in the CBD with the current vacancy rate at about 25 percent. Any new development in this area will require exceptionally strong pre-leasing or build-to-suits.”

In Winston-Salem, the most significant opportunity for long-term, large-scale development is in the downtown area. One West Fourth Street, a 13-story, 431,000-square-foot office tower developed by Magnolia Partners, opened earlier this year with Wachovia Bank and the law firm of Womble Carlyle Sandridge & Rice as the lead tenants. Even in the wake of Wachovia’s announcement to put up to 640,000 square feet on the market, Wake Forest University School of Medicine recently announced ambitious plans to expand the Piedmont Triad Research Park from its present location on about 11 acres in the southeastern corner of the CBD to an area comprising up to 180 acres adjacent to the CBD.

In Greensboro, the proposed FedEx hub at Piedmont Triad International Airport should generate more demand for office tenants associated with operations that need to be close to the hub. Located less than 4 miles from the airport, Highwoods Park at Jefferson Village should be in a good position to attract office tenants over the long term. Developed by Highwoods Properties, this 80-acre master-planned development is in its beginning stages with only one 100,000-square-foot multi-tenant office building completed.

“Given the current market conditions, there are very few growing tenants expanding into large blocks of space,” Caudill notes. In the Winston-Salem CBD, BB&T is in the process of moving into the space vacated by Womble Carlyle Sandridge & Rice at BB&T Financial Center. Krispy Kreme continues to expand its presence at 370/380 Knollwood as it continues to look for its new headquarters location.

Class A rates are currently in the range of $16.50 to $23 per square foot, full service. Overall Class A vacancy rates are just under 14 percent; Class B, 22 percent; Class C, 34 percent.

The Greensboro/High Point/Winston-Salem markets have traditionally been very conservative from a development standpoint. Developers have usually been cautious to prevent oversupply of space. However, the general economic conditions and local market conditions have overrun this conservatism, creating some of the highest vacancies seen in years.

“On a positive note, these vacancies may prove to be an important tool to help recruit new office employers to the area,” Caudill adds. “Being able to offer large blocks of Class A office space, coupled with a highly qualified workforce and quality of life, should give the area significant consideration from major employers interested in locating operations in the area.”


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