Construction Begins at $60M Office Tower in Raleigh
A $60 million, 17-story office building, now known as CAPTRUST Tower at North Hills after its first big tenant, is under construction in Raleigh, N.C., and will include 274,000 square feet of Class A office space and 28,400 square feet of retail space when it is completed in mid-2009.The tower is being developed jointly by Indianapolis-based Duke Realty Corp. and Kane Realty Corp. of Raleigh in a 100-acre mixed-use district in North Hills known as Midtown. It is located at Six Forks Road and Interstate 440, with direct access off the interstate, and is part of Kane’s $800 million North Hills mixed-use development. CPN reported Mar. 9, 2007, that it would be the tallest building in the area and eventually be surrounded by more than 25 restaurants and cafes, an athletic club, a four-star hotel, 90 boutiques and shops and a 14-screen theater.CAPTRUST Financial Advisors became the tower’s first tenant and has agreed to lease 51,000 square feet for its headquarters. Two other tenants are CB Richard Ellis Inc. and the law firm of Ogletree, Deakins, Nash, Smoak & Stewart, P.C. Executed leases to date total more than 100,000 square feet, according to Jeff Sheehan, Duke’s senior vice president of Raleigh operations.“We had a target for preleasing and we’re pleased to have a third of the building leased,” Sheehan told CPN today. Sheehan said the rents would be about $30 per square foot. The average Class A rents for the overall Raleigh market were $21.30 for the third quarter of 2007, according to a Colliers Pinkard research report. Sheehan said there are some buildings currently leasing at about $30 per square foot, but noted they see their main competition as the buildings renting for $25 to $26 per square foot. “We won’t be for every tenant, but for the ones that want to be at the high end, we feel we have the best offer,” he said. “The construction of the first office tower at North Hills is significant because it furthers our commitment to developing a community where people can live, work and play,” added Kane Realty CEO John Kane.CAPTRUST, an independent research and advisory firm that focuses on retirement plans, announced in November that it was moving its headquarters to the top two floors of the planned tower. The 11-year-old firm with nearly 100 employees is outgrowing its current headquarters three miles away at 8816 Six Forks Road, company CEO J. Fielding Miller stated in November. In addition to its headquarters, it has five district offices and three local offices on the East Coast.The North Hills project is one of several mixed-used developments under construction or planned for Raleigh, according to a Nov. 16, 2007, report by CPN. Officials said the area’s residential boom and job growth were driving the live-work-play developments. Industry experts said Kane’s plans for North Hills, the former site of the Triangle area’s first enclosed mall, were among the first successful examples of the concept in Raleigh. Kane bought the land for $16 million in 2001, demolished the old mall and built new retail structures that now include tenants such as JC Penney and Regal Cinema, according to a June 28, 2007, CPN story.“Nowhere in the Triangle do you have such a well-executed mix of new development,” Sheehan said of Kane’s overall project. He said there is currently about 800,000 square feet of retail, about 120,000 square feet of office space and an apartment complex already built. Also under way there is a condominium project and a Renaissance hotel, Sheehan added. Sheehan said the CAPTRUST Tower at North Hills would have several restaurants, including a high-end steakhouse or other white tablecloth restaurant, as well as space for boutiques on the first floor. “The mixed use, the visibility and the direct access to I-440, those are the main attractions,” he said of the tower. Meanwhile, the Raleigh office market has slowed a bit as companies in need of large blocks of Class A space are waiting for completion of buildings like the CAPSTONE Tower at North Hills, according to a third-quarter 2007 market report by Grubb & Ellis Co. The report noted that the short-term outlook for office space in the Triangle market was measured because of the ongoing credit crunch and housing market woes. But the report predicted a “decidedly positive” long-term outlook.“The region is enjoying strong momentum in attracting new and expanding companies, and the significant increase in commercial construction is helping to soften the effects of slowing residential activity,” the Grubb & Ellis research report concluded.A third quarter report by Colliers Pinkard also noted that the quarter had been sluggish but expected the fourth quarter of 2007 would “bring a return to the absorption levels that the Triangle has grown accustomed to these past several years.”The Colliers Pinkard report stated that overall office vacancy was 13.11 percent, about the same as the 13 percent posted in the second quarter and 13.83 percent in Q3 of 2006. Class A saw a slight decrease in vacancy in Q3 2007, down to 11.15 percent from the previous quarter’s 11.23 percent and from 12.06 percent for the third quarter of 2006.