Interview: Amy Carroll, President Principal, TradeMark Properties

Amy Carroll

President & Principal TradeMark Properties

What is your take on the strength of Raleigh’s commercial real estate market?

It has been an incredible journey. Things really paused between March and July due to COVID-19. Activity started picking up in Q3 because everyone began to seek certainty. We are so lucky to be in a market that is pretty COVID-insulated. We do not rely on mass transit, nor do we have a high reliance on tourism activity. The talent pool is incredible, our housing market remains strong, our commercial real estate market remains strong, as people continue to fight to invest in Raleigh. One of our latest deals received 30 offers on two flex buildings. It just shows the competition here and the strength of the market. That goes a long way in showing people things are happening again. In Wake County, December 2020 was higher than December 2019 from a sales volume standpoint.

How would you characterize the future of office space?

It’s an interesting phenomenon because last year, people were reluctant to sign multiyear renewals. Companies were afraid to project out too far. This year, we’re seeing confidence return, which we believe is absolutely related to the efficiency of rolling out the vaccines. Confidence is returning and we’re starting to sign five and seven-year leases again, which is normal for our market and what has been the minimum for both landlords and tenants.

What are some of the prevalent challenges within the commercial real estate space?

Repurposing retail spaces that are either dark or gray at this point is going to be critical. So many things have transitioned to online during COVID that these service experience locations and entertainment venues are really suffering. We’ve had more retailers go bankrupt in the past year than in 2007-8, which is an astounding statistic. Instead of replacing big box retailers we’re converting those spaces into concepts such as walk-in clinics. COVID is changing the face of retail.

Real estate investment across different asset classes is expected to bolster the recovery of the local economy.

on the best information,” Skanska Executive Vice President and General Manager Greg Peele told Invest:. “Unprecedented price escalation and labor shortage issues are two of the major challenges in our industry today that we are closely monitoring. What used to be a predictable 2-4% increase per year, has now become a component-by-component escalation analysis that is affecting overall budgets by about 15%. Honest and frequent communication with clients about these escalation issues are vital in limiting any surprises throughout the project. These conversations enable us to work with our clients and their designers to consider alternatives and options that may help them preserve their budgets before we go to the market,” he said.

While challenges loom for the construction industry at large, Raleigh-Durham is poised to continue to draw investment dollars and new projects across different

asset classes despite supply chain disruptions and the ongoing labor market crunch. Despite the optimism, managing expectations and proper planning are key factors as the pandemic conditions improve. “We are also carefully planning with our clients on realistic scheduling before we start a construction project because of the current lack of manpower. Labor shortages are extending what would typically be a 20-month job into a 22-month job. We have confidence that these issues will ultimately resolve as the market has always stabilized itself historically, but we are now diligently managing client expectations and mitigating schedule disruptions wherever possible,” Peele said.

Looking ahead Despite a challenging cycle, the Raleigh-Durham commercial real estate and construction market has rolled with the pandemic challenges thanks to years of continued investments, economic diversification and population growth. Multifamily and industrial assets are expected to carry the bulk of development and investment activity in the Triangle market during the recovery process. The livelihood of the office sector continues to be tightly associated with the ongoing pandemic, the mutating variants and the vaccine distribution; however, the full return back to the office is more a matter of when, rather than if.

More than a year and a half into the pandemic, macro factors such as ongoing population growth, healthy economic development activity and stabilizing unemployment rates demonstrate Raleigh-Durham’s resilience and ability to contend with unprecedented changes.

Jamie Baker

President – The Lundy Group

I think we’re going to see continued growth in the commercial sector in line with pre-pandemic growth numbers. I think it’s going to be a return to the mean. Coming out of the pandemic, we’ve experienced some growth that some of our competitors have not had. It’s an opportunity for us to pick up some market share with our proven track record of working and performing under pressure during the pandemic. So, we anticipate continued growth not only of our firm but of our industry. The Triangle continues to be an attractive region for population growth and that is another ingredient in our optimistic outlook.