On January 22, 2020, at the PNC Arena in Raleigh, the Annual Triangle Commercial Real Estate Conference made history on two fronts.

First, it marked the 35th consecutive year that extensive market research and reasoning were freely shared with an audience of the area’s business, government and community leaders.

Second, the 35th Annual Conference was the first such event hosted by the newly merged Tri Properties | NAI Carolantic Realty. This combination has created one of the largest full-service brokerage companies in the region.

Together, the firms have more than 75 years of local expertise and a combined leasing and sales portfolio in excess of 12.7 million square feet, including office, industrial, retail, flex, and investment properties as well as 7,000+ acres of available land.

The two companies have a shared history and commitment to the region. NAI Carolantic founder, Steve Stroud, assembled the land that is now Imperial Center over 40 years ago. Under the leadership of Greg Sanchez, Tri Properties oversaw development, leasing and property management of Imperial Center, which today has over 7.5 million square feet of office, flex, R&D and warehouse/distribution space.

Greg Sanchez and Steve Stroud plan to maintain their two offices as they integrate teams. Sanchez is running the day-to-day operations of Tri Properties | NAI Carolantic Realty.

The combination of professional brokerage teams and exceptional third-party property management and construction services creates a synergy unlike any other commercial real estate firm in the region.

Making History: Tri Properties | NAI Carolantic Realty

True legacies last for lifetimes. And that’s what we are creating. Steve Stroud, SIOR Founder, NAI Carolantic Realty

This is going to give our company added depth and unlimited capabilities that we can provide to our customers. Greg Sanchez, SIOR, President Tri Properties | NAI Carolantic Realty

Steve Stroud, SIOR; Greg Sanchez, SIOR

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YTri Properties | NAI Carolantic Realty’s conference is considered the authoritative “state-of-the-market” report on the Triangle’s real estate sector. The findings presented provide an important bellwether of the region’s general economic vitality. The legacy being celebrated began in 1985, when the firm then known as Carolantic Realty first shared the information gathered in its own survey of landowners, developers and other sources with the larger business and investment community.

From a small meeting in a hotel banquet room, the event has evolved into the largest and most authoritative conference of its kind in the nation. Data is collected on office buildings, retail space, business parks, and industrial space covering in excess of 285 million square feet of space from over 8,500+ buildings located throughout the Triangle. Existing space, vacancy rates, absorption, new construction, and planned or proposed construction are researched annually.

When the first Triangle Commercial Real Estate Conference was held in 1985, who in that hotel meeting room could have predicted how much our region would grow both within and beyond the original Triangle points of Raleigh, Durham and Chapel Hill? Which one could imagine the creation of 30,000 new jobs in a single year, as occurred in 2016? Who could foresee the worldwide impact of ideas developed right here, and the new technologies still undreamed-of back in 1985?

Yet even after more than three decades of growth and change, the foundations that underlie our enviable quality of life remain strong. That is a legacy worthy of celebration.

In the pages ahead, we will once again provide an in-depth look at commercial real estate in the Triangle and offer our forecast for 2020.

35 Years of Expert Market Analysis

An informative gathering for 1,600 national and regional real estate

developers and investors, as well as area business leaders and

community/government officials.

At the time of the conference, all signs were pointing to a good year ahead for the area’s overall economy and commercial real estate markets. That was the message conveyed at the 35th Annual Triangle Commercial Real Estate Conference, where over 1,600 invited guests gathered in Raleigh’s PNC Arena to consider the health and direction of the local economy in the coming year.

Steve Stroud, SIOR, welcomed the crowd and recognized the many elected officials in attendance. He spoke on the subject of building a legacy – specifically a legacy of achieving the best outcomes for clients and the community. Stroud then introduced Greg Sanchez, SIOR, now President of Tri Properties | NAI Carolantic Realty.

In his remarks, Sanchez spoke on the importance of being relationship-oriented versus transaction-oriented. “We plan to continue contributing to our community for decades to come by building sustainable projects, finding transportation solutions, improving parks, infrastructure, schools and our quality of life.”

Jimmy Barnes, SIOR, then took the stage to deliver his detailed perspective on the state of the Triangle commercial real estate market. Barnes looked back at the market performance in 2019 and gave his forecast for 2020 based on market analysis and his 28+ years of experience as a broker and a leader in the Triangle area.

The featured speaker, Dr. Nido Qubein, then demonstrated the skills that have made him a member of the International Speakers Hall of Fame. He spoke about living in the “Age of Acceleration” and the importance of perspective. Dr. Qubein spoke passionately about the American Dream. “Don’t tell me it can’t be done in America,” he said.

35th Annual TriangleCommercial Real Estate Conference

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Jimmy Barnes, SIOR

With over 28 years of commercial real estate experience exclusively in the Triangle area, Jimmy Barnes has brokered more than $500 million in transactions just over the last few years. He provides exclusive tenant, buyer and landlord representative services to local, corporate and investment companies, and has represented large Class “A” office developments in Cary and Raleigh. Barnes is recognized as one of thetop real estate brokers in the Triangle area.

Kerry B. Saunders

A part of the NAI Carolantic team since 1987, Ms. Saunders was named Vice President of the company in 2012 and was promoted to Executive Vice President & Chief Operating Officer in 2015. In addition to her strategic, operational and adminis-trative responsibilities, Ms. Saunders directs all aspects of marketing, research and business development for the company. She also oversees the production of NAI Carolantic’s Annual Triangle Commercial Real Estate Conference, including the compilation of the real estate data for the final report available to clients and the community.

Greg Sanchez, SIOR

Greg Sanchez has been President of Tri Properties since 1994 and has played an instrumental role in the commercial real estate market around the Research Triangle Park. He has developed more than 4.5 million square feet of office, in-dustrial and retail space, including the Imperial Center. One of the largest mixed-used business parks in the Southeast, Imperial Center has been named the region’s “Top Development Project” three times (1995, 2000, 2007). Within Impe-rial Center, he developed IQVIA (formerly Quintiles) Tower – an award-winning property that has become one of the landmark build-ings in the Triangle. Greg remains the leader of the newly merged Tri Properties | NAI Carolantic.

Guest Speaker: Dr. Nido Qubein

An accomplished business leader and philanthropist, Dr. Qubein grew up in the Middle East as the son of a single mother. In search of the opportunity to thrive, he came to the U.S. as a teenager with limited English and $50 in his pocket. In addition to serving as president of High Point University, he is chairman of Great Harvest Bread Company and serves on the boards of corpo-rations and non-profits. As a noted professional speaker he engag-es audiences on topics covering change, leadership and branding.

E. Stephen Stroud, SIOR

NAI Carolantic founder and Chairman Steve Stroud began his real estate career in 1965 brokering commercial/industrial land and buildings. His role in many of the area’s most significant real estate developments and tireless contributions to the region’s econom-ic development – including creation of the PNC Arena and recruitment of the Carolina Hurricanes – won him a place among the Triangle Business Journal’s 100 Most Influential Busi-ness Leaders in the Triangle. Stroud’s most recent achievements include the land assemblage of more than 2,500 acres for the Moncure Meg-asite in Chatham County.

Barnes reported that the overall market was healthy last year with vacancy rates down in the multipurpose, shopping center and office categories. Four office submarkets had single-digit vacancy as office rents continued an upward climb. The industrial sector already has over 3.4 million square feet underway, which is 40% more than was built in 2019. The office market will also have another record year of construction, surpassing 2019 with 3.1 million square feet already underway.

2020 Property Types Forecast

2020 Investor Outlook for LandFor 2020, we expect another strong year of demand in all categories, with prices continuing to rise. Land for apartments is at a premium. The number of developers seeking industrial and flex land remains extremely high. With Class A land in the Triangle starting to diminish, expect more redevelopment of existing facilities. While high prices for residential land puts downward pressure on the developer’s spread on lot development, national home builders are willing to pay these premiums.

2020 Investor Outlook for Income Property In 2019, we saw the Fed drop interest rates, fueling record sales across virtually every asset class. Our 2020 forecast for the Triangle is more of the same. Steady market demand will keep cap rates compressed. Purchases of existing product, particularly in the industrial and flex segments, will see a strong upside given the gap in rental rates due to construction costs. We believe that 2020 may mean more than just a new decade. It could usher in a new, longer timeline for economic cycles.

As we enter 2020, over 7.5 million square feet of new construction is underway in our market, coming off 4.8 million square feet built in 2019. Jimmy Barnes, SIOR

OFFICE:2019 was another strong construction year in the office market with 2.3 million square feet added. 2020 will be another record construction year, surpassing 2019 with 3.1 million square feet of new space already underway. Suburban Raleigh is a very active submarket. Expect a slight uptick in vacancy from the record low of 6% in 2019. Still, this remains a landlord’s market. Overall in the office market, we predict that vacancy will rise from 8% to 10%, but will remain a healthy market.

SHOPPING CENTERS:In 2019, 580,000 square feet of new construction was completed, compared to 411,000 in 2018. Still, vacancy actually dropped a small amount, from 4% to 3%. In 2020, we expect another overall healthy year. The amount of construction already underway is almost double the 2019 total for shopping centers. Vacancy should remain at 4%. As a market trend, food and beverage, fitness, and coworking spaces will become prominent tenants for shopping center owners who have seen retail closures in their properties.

SINGLE-FAMILY HOUSING:The sales volume actually fell in 2019, and inventory rose to its highest point since 2012. Home prices in 2019 increased by a modest 3.3%. As we move into 2020, we expect inventory to drop as sales remain strong and newly built homes are absorbed. Interest rates will remain low and the region’s strong job and population growth will propel housing sales. We expect to see much of the sales increase in outlying counties surrounding the Triangle region, to include Lee, Chatham, Franklin and Nash.

MULTI-FAMILY MARKET: The apartment vacancy rate dropped to 4.9%, the lowest in twenty years. Expect 2020 to be another big construction year, with 7,600 units already underway as the year began. There should be modest rent growth as another 3,000 units are absorbed. The apartment vacancy rate should stay about the same – around 5%.

HOTEL MARKET: According to the Greater Raleigh Convention and Visitors Bureau, interest in building new hotels in the Raleigh area continues to be strong. In 2019, occupancy in Wake County was 75.2%, an increase of 3.7% and one of the highest in over 17 years. The average daily rate also rose slightly to $109.70, again the highest level in over 17 years. In 2020, Wake County has eight new projects scheduled, adding 878 new rooms – compared to 195 rooms added in 2019. Durham County has one new project scheduled adding 104 new rooms.

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ISMULTIPURPOSE: In 2019, vacancy went down from 7% in 2018 to a record low of 6.7%. Of the property types, the industrial market continues to be the most attractive area for investment and that will continue in the year ahead. As 2020 began, 3.4 million square feet of flex and industrial construc-tion were underway – 40% more than the 1.9 million built in all of 2019. However, because of market demand, vacancy rates should stay in single digits. Land and con-struction costs will be high and landlords will be pushed to try to raise rental rates.

Clay Stober, SIOR Jimmy Barnes, SIOR Robin Roseberry Anders, SIOR

Greg Sanchez, SIOR

Ryan Gaylord, SIOR, CCIM

Ed Brown, SIOR, CCIM Hunt Wyche

Steve Stroud, SIOR

Jordan Williams

Pam Michael

Daniel Herring

John Hibbits

Becky Capps

Richard Hibbits Kacy CogginRob Griffin

Joaquin Canals

Nadine Pittman

Gray Creech

Carson Wilson

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Michael Wallace

Teamwork. Results. Integrity.Tri Properties | NAI Carolantic Realty brings many of the area’s leading commercial property brokerage professionals together with one of the Triangle’s most prominent development, construction services and property/facilities management firms. With a combined 75 years of experience in our local market, Tri Properties | NAI Carolantic Realty share a common philosophy based on building relationships and earning clients’ trust. We will continue to be a reliable, innovative partner with the local insight and industry expertise to professionally manage all of your commercial real estate.

With a team of brokers responsible for the sale and leasing of approximately 12.7 million square feet of office, industrial, flex and retail space in the Triangle area, Tri Properties | NAI Carolantic Realty also has a large and varied inventory of land for sale that presently exceeds 7,000 acres.

Our local market knowledge and decades of experience allow us to help you navigate today’s sophisticated real estate market in a way that few others can. We are committed to providing an exceptional level of personal attention and customer service. We take a personal interest in our clients and strive to exceed your expectations.

From buying, selling and leasing properties to managing tenants or maximizing real estate investments, Tri Properties | NAI Carolantic Realty provides the teamwork and integrity that gets results.

NAI GlobalTri Properties | NAI Carolantic Realty is strengthened by its status as the Triangle and Eastern North Carolina’s exclusive member of NAI Global, the largest organization of real estate brokerage firms in the world. With more than 6,000 local market experts working in more than 375 offices around the world, NAI Global firms complete more than $55 billion in transactions each year. Their independent ownership ensures a matchless combination of local responsiveness and seamless global service.

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Property and Facilities ManagementTri Properties | NAI Carolantic Realty is among the largest property management companies in the region with a management portfolio in excess of 7.5 million square feet. We understand the importance of tenant retention and loyalty. Our team is keenly focused on keeping your tenants happy, and that begins with exemplary customer service. Property managers routinely visit customers to understand and anticipate their needs, and our highly-skilled team of maintenance engineers are given the independence to quickly resolve concerns out in the field.

Construction ServicesOur construction management and general contracting teams have developed millions of square feet of property across the Triangle. We understand that construction projects require constant management and oversight – developing and managing budgets, schedules, and resources – from start to finish. We develop close relationships that enable us to fully understand your building needs and collaborate with architects, engineers and others to ensure the project meets your exact specifications. And we remain flexible throughout the project to adapt and adjust to any issues that may arise.

DevelopmentTri Properties | NAI Carolantic Realty has been responsible for the successful development of millions of square feet of commercial space in the Triangle. Companies from GSK and IQVIA (formerly Quintiles) to institutional clients such as Principal Real Estate Investors and Northwestern Mutual have trusted us to develop projects from 6,000 to 450,000 square feet. From site acquisition through project completion, each project is methodically planned and professionally implemented.

We are proud of our history of achievement. Our financial acumen and quality of work has earned the confidence and trust of the Triangle’s most notable lenders, investors and property owners. And we are continually striving to raise the bar ever higher.

Notable projects include: • Imperial Center • IQVIA Tower • Town Hall Commons • Northchase at Midtown • Palladian Corporate Center

Property Management Team

Property Maintenance Team

Bobbitt Design Build (www.bobbitt.com) For over 70 years we’ve listened, created value and delighted our clients with best-in-class site and architectural design, engineering, permit coordination and construction services under one roof. Experience design build from Bobbitt. Jim Bell – 919-851-1980

DMJ & Co., PLLC (www.dmj.com) DMJ is a Top 300 North Carolina CPA firm providing audit and accounting, tax planning, preparation, financial, and compliance services to corporate and individual clients with offices in the Triad, Triangle, Sandhills, and Coastal Cape Fear. Personal attention. Verifiable results. Charlie Welborn, CPA – 919-774-4535

TriSure (www.trisure.com) TriSure, one of the area’s leading insurance brokers, provides insurance and risk management services to the Triangle’s preeminent companies and discerning individuals. TriSure takes pride in providing professional service and prompt, thorough solutions to surpass their clients’ expectations. Kurt Sokolowski – 919-819-8366

Wells Fargo (www.wellsfargo.com) Wells Fargo is a diversified, community-based financial services company with $1.9 trillon in assets. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially. News, insights and perspectives from Wells Fargo are also available at Wells Fargo Stories. John Ward – 919-881-7002

Conference Partners Reception Partners

celito.net (www.celito.net) celito is a Raleigh, NC Internet service provider offering a variety of business technology solutions, including fiber Internet, voice, data center colocation, and IT consulting services. Choose a local IT company. Call 919-852-1238

JDavis (www.jdavisarchitects.com) JDavis connects communities through design by creating places that bring people, cities and regions together. It is our mission to build value for clients, ourselves and communities; and to pass it on to those who come after us. Neil Gray – 919-835-1500

Manning, Fulton & Skinner, P.A. (www.manningfulton.com) For over 60 years, Manning Fulton has provided to clients exceptional legal services in practice areas that include commercial real estate, commercial & complex litigation, construction, condemnation, corporate & transactional, franchising, mergers & acquisitions, tax, estate planning and government relations. Barry D. Mann – 919-787-8880

WithersRavenel (www.withersravenel.com) WithersRavenel helps craft successful projects through placemaking and partnerships. We provide quality engineering, planning, landscape architecture, geomatics, and environmental services to our valued customers. For more than 36 years, our employee-owners strive for reliability and value. Jim Canfield – 919-469-3340

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The reputation for accuracy of Tri Properties I NAI Carolantic’s sought-after forecasts is a result of our tireless efforts, our extensive network of contacts, and our combined 75 years of experience in the Triangle real estate market. Our local roots bring a homespun understanding to our assessments of this market, and our global con-nections give us an overarching perspective of what we see happening here. This report is only a small sample of what we have to offer.

CHATHAMCOUNTY

Approx. Scale: Miles

Raleigh Office

University of North Carolina

PNC Arena

Fuquay Varina

To Sanford

Durham Office

Triangle Area Map

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SHOPPING CENTER SPACE

MULTIPURPOSE SPACE

OFFICE SPACE 2019 2019 2018-19 2019 2018-19 Under 2018-19

Supply Vacant Absorbed Vacant Absorbed Const. Growth

DowntownRaleigh 6,698,000 365,000 609,000 5% 9% 12% 10%

SuburbanRaleigh 36,504,000 2,153,000 1,279,000 6% 4% 3% 1%

Cary-Apex-Morrisville 10,168,000 578,000 860,000 6% 9% 2% 3%

ResearchTriangleParkArea 20,570,000 2,643,000 747,000 13% 4% 3% 0%

SuburbanDurham&ChapelHill 13,141,000 1,175,000 541,000 9% 4% 3% 3%

DowntownDurham 4,707,000 493,000 320,000 11% 7% 5% 13%

Area-Wide Totals 91,788,000 7,407,000 4,356,000 8% 5% 3% 3%

2019 2019 2018-19 2019 2018-19 Under 2018-19

Supply Vacant Absorbed Vacant Absorbed Const. Growth

Downtown–CentralRaleigh 8,649,000 551,000 157,000 6% 2% 5% 1%

NorthRaleigh-WakeForest 23,727,000 1,081,000 396,000 5% 2% 1% 0%

WestRaleigh-Cary-Apex 24,299,000 1,791,000 397,000 7% 2% 2% 1%

ResearchTriangleParkArea 27,308,000 2,642,000 1,903,000 10% 7% 2% 3%

EastRaleigh-Knightdale-Zebulon 11,546,000 709,000 855,000 6% 7% 1% 3%

SouthRaleigh-Garner-FuquayVarina 17,268,000 989,000 1,014,000 6% 6% 3% 1%

Durham&ChapelHill 23,765,000 1,335,000 1,286,000 6% 5% 5% 1%

Area-Wide Totals 136,562,000 9,098,000 6,008,000 7% 4% 3% 1%

2019 2019 2018-19 2019 2018-19 Under 2018-19

Supply Vacant Absorbed Vacant Absorbed Const. Growth

NorthRaleigh-WakeForest 14,548,000 364,000 516,000 3% 4% 0% 4%

WestRaleigh 6,248,000 205,000 56,000 3% 1% 1% 0%

Cary-Apex-Morrisville 13,195,000 338,000 11,000 3% 0% 5% 0%

EastRaleigh-Knightdale-Zebulon 3,918,000 153,000 -11,000 4% 0% 0% 0%

SouthRaleigh-Garner-FuquayVarina 5,314,000 169,000 112,000 3% 2% 3% 0%

Durham&ChapelHill 13,565,000 353,000 69,000 3% 1% 0% 0%

Area-Wide Totals 56,788,000 1,582,000 753,000 3% 1% 2% 1%

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SHOPPING CENTER VACANCY TRENDS SHOPPING CENTER ABSORPTION TRENDS

OFFICE VACANCY TRENDS OFFICE ABSORPTION TRENDS

MULTIPURPOSE VACANCY TRENDS MULTIPURPOSE ABSORPTION TRENDS

2010

9%

17%

15%

22%

15%

6%

17%

2011

10%

15%

15%

23%

12%

6%

16%

2012

10%

13%

14%

19%

13%

9%

14%

2013

7%

12%

13%

22%

13%

7%

14%

2014

12%

11%

12%

19%

11%

8%

13%

2015

11%

9%

8%

16%

9%

4%

10%

2016

11%

10%

9%

17%

11%

4%

11%

2017

6%

9%

11%

15%

10%

5%

10%

2018

3%

8%

8%

14%

9%

8%

9%

2019

5%

6%

6%

13%

9%

11%

8%

09/10

-2%

-2%

2%

-1%

-2%

2%

-1%

10/11

-1%

2%

0%

0%

4%

0%

1%

11/12

2%

4%

1%

3%

0%

-1%

2%

12/13

5%

1%

1%

-1%

3%

3%

1%

13/14

1%

1%

3%

5%

3%

3%

2%

14/15

1%

2%

4%

3%

3%

4%

3%

15/16

1%

1%

0%

-2%

0%

6%

0%

16/17

5%

2%

0%

3%

2%

0%

2%

17/18

6%

2%

4%

3%

3%

10%

3%

18/19

9%

4%

9%

4%

4%

7%

5%

2010

17%

15%

14%

15%

17%

23%

20%

17%

2011

17%

14%

12%

14%

14%

18%

20%

16%

2012

15%

13%

11%

12%

8%

16%

17%

13%

2013

9%

13%

7%

9%

9%

17%

15%

11%

2014

5%

10%

8%

11%

9%

13%

14%

11%

2015

7%

8%

7%

6%

6%

10%

11%

8%

2016

5%

8%

8%

11%

8%

9%

8%

9%

2017

4%

6%

7%

14%

10%

10%

8%

9%

2018

5%

5%

7%

13%

4%

5%

6%

7%

2019

6%

5%

7%

10%

6%

6%

6%

7%

09/10

-2%

-1%

1%

-1%

-3%

-3%

3%

0%

10/11

0%

2%

2%

2%

1%

4%

2%

2%

11/12

7%

1%

2%

1%

6%

1%

6%

3%

12/13

2%

3%

5%

3%

2%

1%

0%

3%

13/14

5%

3%

2%

-1%

4%

4%

2%

2%

14/15

-2%

3%

2%

5%

4%

3%

3%

3%

15/16

4%

2%

2%

-3%

2%

2%

1%

1%

16/17

1%

1%

1%

-1%

0%

0%

1%

1%

17/18

1%

1%

1%

4%

7%

6%

3%

3%

18/19

2%

2%

2%

7%

7%

6%

5%

4%

2010

5%

2%

6%

10%

9%

8%

6%

2011

6%

2%

4%

9%

9%

8%

6%

2012

4%

2%

4%

9%

5%

5%

5%

2013

4%

2%

3%

11%

3%

4%

4%

2014

3%

3%

5%

6%

7%

3%

4%

2015

4%

2%

4%

3%

3%

3%

3%

2016

2%

3%

2%

4%

2%

3%

2%

2017

2%

3%

3%

4%

5%

3%

3%

2018

3%

2%

4%

4%

4%

4%

4%

2019

3%

3%

3%

4%

3%

3%

3%

09/10

3%

0%

2%

0%

-3%

0%

1%

10/11

-1%

0%

7%

5%

0%

1%

2%

11/12

3%

0%

7%

0%

5%

2%

3%

12/13

1%

0%

2%

-2%

2%

2%

1%

13/14

1%

0%

1%

8%

-3%

1%

1%

14/15

-1%

0%

1%

4%

4%

-1%

1%

15/16

4%

-1%

2%

-1%

2%

0%

2%

16/17

1%

1%

2%

0%

-3%

0%

1%

17/18

2%

2%

0%

-1%

1%

-1%

0%

18/19

4%

1%

0%

0%

2%

1%

1%

NEW CONSTRUCTION

In 2019, the overall market added over 4.7 million SF of new construction, with approximately 7.5 million SF under construction at the start of 2020. For perspective, in 2010 the market added fewer than 650,000 SF. The office category leads the way once again, with 2.3 million square feet added. The multipurpose category follows with over 1.9 million SF built in 2019. For shopping centers, 580,000 SF was completed, and double that amount is already underway at the beginning of 2020. North Raleigh experienced the most retail growth of any submarket.

AREA-WIDE ABSORPTION

A total of 11 million SF of office, multipurpose, and shopping center space was absorbed in 2019, improving on 7.3 million SF for the entire year in 2018. The overall office market improved by two percentage points, from 3% to 5%, with 4.3 million SF absorbed. Downtown Raleigh and the Cary/Apex/Morrisville submarkets led the way with office absorption at 9%. The overall multipurpose category rose from 3% in 2018 to 4%, compared to 1% absorption in 2017. Retail absorption increased from 0% in 2018 to a healthier 1% in 2019. Unlike in 2018, none of the submarkets surveyed reported negative absorption.

AREA-WIDE VACANCY

With record absorption came record low vacancy rates and a landlord’s market. Overall, vacancy for the office category fell to a record low of 8% in 2019. The multipurpose vacancy rate went down from 7% in 2018 to a record low of 6.7%. Even with the delivery of 580,000 SF of new retail construction, shopping center vacancy actually dropped, from 4% in 2018 to 3% in 2019.

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12%

10%

8%

6%

4%

2%

0%

-2%

-4%

-6%

’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19

■ Shopping Centers ■ Office ■ Multipurpose Absorption as percentage of market size

4%

5%5%

3%

2% 1%

20%

18%

16%

14%

12%

10%

8%

6%

4%

2%

0%

’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19

■ Shopping Centers ■ Office ■ Multipurpose

5%

14%

12%

3%

8%

7%

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 min ’20

■ Shopping Centers ■ Office ■ Multipurpose Square Feet (in thousands)

1,433

2,529

1,039

3,366

962

3,129

MULTIPURPOSE – NEW CONSTRUCTION BY SUBMARKETS

At the start of 2020, 3.4 million SF of multipurpose/flex/warehouse space were underway – 40% more than the 1.9 million SF built in all of 2019. The Durham/Chapel Hill submarket leads with approximately 1.2 million square feet, or 35% of the total. The RTP/I-40 submarket was second with 564,000 SF being built, 17% of the total. The West Raleigh/Cary/Apex submarket was third with 485,000 SF. Much of the new construction is fueled by the growing demands of e-commerce logistics and construction supply distributors.

OFFICE – NEW CONSTRUCTION BY SUBMARKETS

Overall, expect another strong construction year in the office market with over 3.1 million square feet of new space already underway, eclipsing the record 2.3 million square feet added in 2019. Suburban Raleigh is once again the leading submarket with 914,000 SF underway, equal to 29% of the total. Downtown Raleigh is a close second with 25% of the total. Suburban Raleigh now has over 36.5 million SF of supply, compared to RTP at 20.5 million.

SHOPPING CENTERS – NEW CONSTRUCTION BY SUBMARKETS

Approximately 960,000 SF of retail space is now under construction. The Cary/Apex/Morrisville submarket is experiencing the most new construction, 628,000 SF, with projects including Wegmans and other retail spaces at Twin Lakes on Davis Lakes Drive. In fact, most retail development is now supermarket driven. In Downtown Raleigh construction is underway on a new Publix, the first full-service grocery chain to enter the Downtown Raleigh submarket. The overall market is forecast to remain healthy with vacancy remaining at 4%.

= Suburban Raleigh 29%

= Cary-Apex-Morrisville 6%

= Suburban Durham-Chapel Hill 14%

= Downtown Durham 7%

= Research Triangle Park Area 19%

= Downtown Raleigh 25%

= Cary-Apex-Morrisville 65%

= North Raleigh-Wake Forest 5%

= Durham-Chapel Hill 5%

= East Raleigh-Knightdale-Zebulon 0%

= South Raleigh-Garner-Fuquay Varina 18%

= West Raleigh 7%

= North Raleigh-Wake Forest 5%

= West Raleigh-Cary-Apex 14%

= East Raleigh-Knightdale-Zebulon-Clayton 2%

= South Raleigh-Garner-Fuquay Varina 15%

= Durham-Chapel Hill 35%

= Research Triangle Park Area 17%

= Downtown-Central Raleigh 12%

n 2%

%

TRIANGLE APARTMENTS

Triangle apartment vacancy dropped from 5.6% in 2018 to 4.9% in 2019 – the lowest in 20 years. As 2020 began, 7,600 new multifamily units were already underway. Predictions call for another 3,500 units to be built and another year of low vacancy, in the 5% range. Rent increases are predicted to be modest.

HOTEL CONSTRUCTION

The Greater Raleigh Convention and Visitors Bureau reported that two new hotels were built in Wake County in 2019, adding 195 rooms. Hotel construction in the Raleigh area will rebound in 2020, with 8 new projects in Wake County and one in Durham County adding a total of 982 rooms into the market. In 2019, occupancy in Wake County was 75.2%, an increase of 3.7%. The average daily rate also rose slightly to $109.70.

SINGLE FAMILY HOMES IN WAKE COUNTY

The NAI Carolantic Housing Momentum Index fell slightly in 2019 and inventory increased to its highest level since 2012. Sales totaled 25,101 units and sales prices increased by 3.3%, compared to 6% in 2018. Our Index considers the annual new and pre-owned sales volume, then subtracts year-end Multiple Listing Service inventory to track sales momentum. In 2020, we anticipate reduced inventory as sales remain strong and new homes are absorbed.

Sources: Market Opportunity Research Enterprise (M.O.R.E.), Triangle MLS, Inc.as of 1/15/20Momentum Index: NAI Carolantic Realty, Inc.

Housing Units■ Sales New & Pre-Owned

■ MLS Inventory New & Pre-Owned

■ NAI Carolantic Momentum Index

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19

13,586

7,917

5,669

25,101

4,037

21,064

28,847

6,022

22,825

10%

9%

8%

7%

6%

5%

4%

Units

10,000

9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

4,791

2,134 2,5183,216

5,010

7,646

Vacancy Absorption Under Construction

6.7%

9.5%

6.1%

7.7%

’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19* ’19U* ’20P*

Dates as of July 2019 U=Under Construction P=ProposedSource: *Real Data Apartment Market Research

3,536

2,488

4.9%

Average Occupancy Average Daily Rate

2009:

2010:

2011:

2012:

2013:

2014:

2015:

2016:

2017:

2018:

*2019:

57.5%

60.0%

63.0%

62.8%

64.6%

69.1%

69.7%

70.2%

70.4%

71.5%

75.2%

$81.31

$79.92

$82.86

$82.70

$86.71

$91.49

$95.87

$101.00

$103.38

$107.06

$109.70

*YTD Figures through November 2019Source: Greater Raleigh Convention & Visitors Bureau

Raleigh/Wake County Hotels

POPULATION FORECAST

Quality of life, educational and employment opportunities, and our mild climate are cited as reasons that multiple sur-veys rank the Raleigh/Durham/ Research Triangle Region as one of the best places to live. Continued growth shows just how much people want to relocate here. Projections for 2020 indicate a population of 2.3 million in our 11-county Combined Statistical Area (CSA). Government officials will remain challenged to manage growth and balance the resources that make our region so desirable.

TRIANGLE JOB GROWTH

Initial estimates indicate that the Triangle added at least 24,700 new jobs in 2019. For perspective, that is quite a step up from the 35,600 jobs lost in 2009. Continued employment growth is critical to our economic well-being, and Wells Fargo Securities forecasts another good year in 2020, with an estimated 22,000 new jobs.

BUSINESS CLIMATE RANKING

Last November, Forbes ranked North Carolina as the Top State for Business in 2019. The Tar Heel state has ranked among the top five on the list for 14 consecutive years. In its Best Places for Business & Careers, Forbes listed Raleigh as 3rd and Durham 17th. Site Selection magazine rated North Carolina 2nd for Top State Business Climate Rankings. In its list of top markets for real estate investors in 2020, Emerging Trends in Real Estate ranked Raleigh/Durham in 2nd place, just behind Austin, TX. Inc. named Durham 3rd Best U.S. City for Starting a Business in 2020.

CU

T OFF

Top State Business Climate Rankings 2019

1. Georgia

2. NORTH CAROLINA3. Ohio

4. Texas

T5. South Carolina

T5. Virginia

7. Tennessee

8. Indiana

9. Alabama

10. Louisiana

Source: Site Selection magazine, November 2019

13,000,000

12,000,000

11,000,000

10,000,000

9,000,000

8,000,000

7,000,000

6,000,000

5,000,000

4,000,000

3,000,000

2,000,000

1,000,000

0’10 ’15* ’20* ’25* ’30* ’35* ’39*

*Projected (Numbers updated as of 10/19) Source: Office of State Budget & Management

Population Growth

North Carolina PopulationCSA Population: Raleigh, Durham, Chapel Hill

1,922,568 2,089,1692,488,032 2,689,201 2,890,193 3,0505,838

2,287,746

9,574,293 10,033,079

11,233,133 11,836,070

12,439,269 12,919,921

10,630,691

’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19E ’20F ’21F

E=Estimate F=Forecast Sources: Wells Fargo Securities & Bureau of Labor StatisticsForecasts provided by Wells Fargo Securities

40,000

30,000

20,000

10,000

0

-10,000

-20,000

-30,000

-40,000

■ Private ■ Public

-4.3

13.2

18.3

25.229.2 30

22.120.6

25.1 22.224.7

18.3

Durham Office

5425 Page Road | Suite 100 | Durham, NC 27703 | +1 919.941.5745 www.triprop.com

Raleigh Office

5121 Kingdom Way | Suite 200 | Raleigh, NC 27607 | +1 919.832.0594 www.naicarolantic.com

@TriProperties@NAICarolantic www.youtube.com/NAICarolanticRealty

www.linkedin.com/company/tri-properties-inc.www.linkedin.com/company/nai-carolantic-realty

@TriProperties@NAICarolantic