Tech companies are driving significant demand for Class A office space in Raleigh-Durham at a time when tenant improvement costs are rapidly on the rise. Last year, Cushman & Wakefield named Raleigh-Durham one of the top 25 tech cities in North America with tech being a “critical” contributing factor for office demand, accounting for more than 8% of the city’s jobs.
Raleigh-Durham’s growth is fueling the need for companies to grow and create office spaces that are unique to each industry. However, tenant improvement costs continue to increase and skilled construction labor hasn’t recovered since the 2008 recession, yet construction demand has continued to soar resulting in an increase in labor costs. Changes in a variety of factors including codes and regulation, as well as steel and aluminum tariffs, have contributed to a rise in overall construction cost. As such, tenant improvement costs have followed suit. From 2010 to 2018, total tenant improvement costs for Class A office space in North Carolina rose from an average of $70 per square foot (psf) to an average of $115 psf while allowances only grew from $35 psf to $65 psf. However, the psf per employee has dropped from 250 sf to 185 sf in that time, meaning owners have less space than before to build out.
Raleigh-Durham’s favorable business climate and high quality of life combined with a growing entrepreneurship vibe create a dynamic environment for entrepreneurs and high-growth companies. As Class A corporate office improvement costs increase, Cushman & Wakefield’s Project & Development Services team takes a closer look at the causes, estimates typical pricing on first and second generation space, and offers solutions for investors and occupiers. Check out the infographic below for more and click here to download a copy.