(Source: By Fran Daniel, Winston-Salem Journal, N.C.) - The overall vacancy rate for office buildings in Winston-Salem has fallen slightly since summer, according to a recent survey by a local real-estate appraisal company.
The vacancy rate fell to 16.6 percent last month from 17.2 percent in July, according to Michael S. Clapp and Associates Inc., which provides surveys every six months. The January survey covers 62 multi-tenant buildings.
The vacancy rate in Class A office space, typically in newer buildings, dropped to 9.5 percent last month from 10.4 percent in July.
Vacancy in Class B office space, typically in older buildings, is still high. But the rate dropped slightly to 23.7 percent in January, compared with 23.8 percent in July.
“It’s a move in the right direction,” said Michael Clapp, the president of Michael S. Clapp and Associates.
He said that part of the reason for the vacancy rate drop is because there hasn’t been a lot of new office space built.
“There hasn’t been 100,000 square feet of office space built in the past year,” he said.
He also said that some buildings have been taken out of the marketplace and are no longer classified as office space.
The overall average asking rent rose 13 cents a square foot last month to $16.71 from $16.58 last July. Asking rents increased in both Class A and Class B office space. The average asking rent rose 11 cents a square foot to $19.67 in January in the Class A market, and was up 12 cents a square foot to $13.80 in the Class B market for the same period.
Clapp said that some landlords have raised their rents in buildings that went to zero vacancy from July to January.
He said that actual rents, which the survey does not report, are most likely lower than asking rents.
Out of the three office submarkets used in the survey — downtown, north and west — downtown Winston-Salem had the lowest vacancy rate at 11 percent, compared with 29 percent in the north and 11.8 percent in the west. Asking rents a square foot rose 10 cents to $16.87 in the downtown area, jumped 21 cents to $14.10 in the north submarket and rose 20 cents to $19.40 in the west submarket.
Clapp believes that asking rents may have reached the bottom in the past six to 12 months.
Abner Wright, a broker for Freeman Commercial Real Estate in Winston-Salem, is finding that some medical office tenants want shorter terms on their leases than in the past, because they don’t know how proposed regulatory requirements in health care will affect them.
But, overall, Wright is encouraged by the improvements he is seeing in the office market.
“I believe there’s a lot of pent-up demand and that should benefit us over the next couple of years,” Wright said.
He is seeing vacancies decline and rent go up in Winston-Salem.
“Both of which indicate an improvement in the office market,” Wright said. “It’s still a tenant’s market, but landlords are offering fewer concessions on the terms of the deals.”
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©2012 Winston-Salem Journal (Winston Salem, N.C.)
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