RALEIGH — Highwoods Properties plans to break ground next month on a fourth office building at its GlenLake office park near Crabtree Valley Mall.
The move is the latest sign of the Triangle’s improving office market. It also reflects the success Highwoods has had with GlenLake, which is 100 percent leased to a mix of tenants that includes PRA International, Ernst & Young, Pepsi Bottling Ventures and Principal Financial Group.
The Raleigh-based real estate investment trust is starting construction with 25 percent of the building’s 166,000 square feet preleased to two law firms: Ellis & Winters, and Hedrick Gardner Kincheloe & Garofalo.
By getting out of the ground now with the $35.8 million project, Highwoods hopes to lure tenants from competitors and be in a good position should any of GlenLake’s existing tenants need to expand.
Several other new Triangle office buildings are in various stages of preleasing, including projects in downtown Raleigh and North Hills. But the actual turning of dirt has proved to be a major catalyst in getting on-the-fence tenants to sign on to new projects.
And Highwoods is breaking ground at a time when there are very few blocks of centrally located, Class A office space in the Triangle. The vacancy rate for Class A space in northwest Raleigh was 10.6 percent in the second quarter, down from 19.7 percent four years ago, according to Karnes Research.
Highwoods, which is charging $28.50 a square foot for space in the new building, expects to complete construction by the first quarter of 2015.
Ellis & Winters and Hedrick Gardner are each leasing 20,500 square feet. Ellis & Winters currently occupies space in one of the Crescent Green office buildings in Cary, while Hedrick Gardner will be moving from the Westchase office complex in West Raleigh.
The 40-acre GlenLake office park is approved for seven buildings and 985,000 square feet. The park’s three existing buildings contain 440,000 square feet.
The new six-story building will be called GlenLake V and will contain several new features, including floor-to-ceiling windows that will allow 31 percent more light inside.
There will also be a 4,300-square-foot fitness center and a new general-use space for tenants that is modeled on a similar space Highwoods recently opened on the ground floor of its Two Alliance Center tower in Atlanta.
The space, which features plasma screens, work stations and living room-type furniture, is designed to bring more activity to the ground floor. Highwoods CEO Ed Fritsch said the space in Atlanta has been popular with tenants.
“Usage has just been off-the-charts good,” he said.
Highwoods can have as much as 30,000 square feet of retail and restaurants at GlenLake. The only retail now is a 2,000-square-foot cafe in the GlenLake Four building.
Fritsch said adding more urban elements to the park now makes sense.
“We’re reaching a point where we have critical mass to provide more amenities,” he said.
About 1,300 employees work at GlenLake, and the new building is expected to add about 400 more. The building is being designed by Rule Joy Trammell + Rubio, the same architecture firm that is designing the $110 million campus Highwoods is building for MetLife in Cary.
With GlenLake V, Highwoods now has $275 million in new development projects underway. Those projects include a total of 1.1 million square feet, 86 percent of which is preleased.
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