February 24th, 2023
Each year, our industry experts evaluate and review the Raleigh, Durham, and greater Triangle commercial real estate market’s annual performance. We share activity and trends from the market data we analyzed and experienced in 2022 to activities we anticipate in 2023.
In this segment, we interviewed Jimmy Barnes, SIOR, Executive Vice President to share his thoughts on flex trends.
Although the real estate markets continue to have pressures relating to an economic slowdown, rising interest rates and negative effects from work-from-home, trends show the Triangle continues to have positive population growth as people want to be here whether they have a job or not. The population growth and some positives from work-from-home have continued to fuel the multifamily and residential markets. Geographic locations with access to regional thoroughfares (i.e., I-40, I-85, I-95) continue to support the industrial/warehouse markets. The residential construction as previously mentioned is also a driver of warehouse development that supports industries in that field (i.e., cabinet and door makers, granite companies, etc.) E-commerce is also a driver of the continued success of the flex and warehouse market.
The office market is struggling due to a decrease in demand fueled by the slowing economy and negative absorption caused by Covid and the work from home trend.
The warehouse/flex market continued to see positive absorption and development throughout 2022. We have seen rental rates continue to rise minimally.
The office market has suffered, and more sublease spaces have hit the market than in 2009. We have experienced one of the largest quarters of negative absorption that this market has ever seen.
Demand for industrial/warehouse remains strong with 3,363,048 SF of positive absorption over the last twelve months. 2.5 million square feet of warehouse space is expected to be delivered in early 2023.
Wigeon Capital at Greenfield Business Park was a big winner with two industrial buildings built, leased, and sold in 2022 and another 300,000 SF underway.
At Garner Business Park 70, Al. Neyer delivered and sold three fully leased industrial warehouses totaling 488,038 SF.
Retail and hospitality should be watched carefully as they are making a comeback. Population growth continues in NE Wake County in areas like Knightdale, US 1, Rolesville, South toward Sanford, and east in the Wendell area.
The warehouse/industrial market continues to be strong with good demand. Vacancy may rise a bit with new development announcements as it will increase supply, however, it will only be minimal and vacancy will remain in the low single digits.
The flex market is also healthy and active. We expect vacancy to remain low, allowing Landlords to push rental rates to record highs. All geographic submarkets are seeing new supply. Merritt Properties has been one of the most active flex developers across the Triangle market, with projects underway or announced in Wake Forest, East Raleigh/Knightdale, RTP, Chapel Hill, and Garner.
There is an opportunity for older flex buildings that can be redeveloped/refurbished and that can drive increased rental rates. Some infill sites that may have challenges will be developed.
Warehouse/industrial land is scarce. Any available land has challenges (topo, access, etc.) and is often overpriced.
Location, price, and efficiencies.
Decisions about flex/warehouse properties are usually based on certain business items as outlined above like location, price, efficiencies, etc. These items can be easily defined in each project.
As you look ahead, planning your CRE goals for 2023, let our real estate advisors help guide you with insider market knowledge and experience.
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