Real Deals

Real Deals: Construction begins on delayed Centennial Campus office building

dbracken@newsobserver.comDecember 18, 2013 

In another sign that demand for office space in the Triangle is picking up, construction has begun on the long-delayed Alliance Center I building on N.C. State University’s Centennial Campus in Raleigh.

The 145,000-square-foot building is expected to be complete by the first quarter of 2015, said developer Craig Davis. He said a little over 70 percent of the space is preleased to two tenants, whom he declined to disclose.

“It’s been very rewarding to get everybody back on the saddle, so to speak,” Davis said. “… Centennial has always been my baby.”

Craig Davis Properties also developed the Venture Center, a five-building complex across Main Campus Drive from the Alliance site.

Alliance was first proposed in 2008, just before the credit markets froze and demand for new office space evaporated. Three years ago, Davis said he was close to securing financing for the roughly $38 million project, which also includes a 523-space parking deck.

Davis said lenders continue to be cautious, requiring developers to prelease blocks of space before committing to a construction loan.

“I think from a preleasing standpoint, it depends a lot on the term and the credit of the people behind it,” he said. “I think most lenders want 50 percent preleased.”

Campus recovers

Alliance’s construction is another good sign for Centennial Campus, which just two years ago lost its largest tenant, Red Hat, when the company shifted its corporate headquarters to downtown Raleigh. But since then Red Hat has subleased all of the space it vacated on campus.

The telecom company Bandwidth now occupies the 75,000-square-foot Venture III building, and LexisNexis has leased a 120,000-square-foot building previously occupied by Red Hat.

The Venture Center includes about 775,000 square feet of space, 97 percent of which is occupied, according to Karnes Research, a Raleigh firm that tracks commercial real estate trends.

Michael Harwood, associate vice chancellor for the Centennial Campus Development Office, said Alliance is much needed given the campus’ current space constraints.

“We think it will give some tenants an opportunity to expand that are already on campus, as well as bringing some new tenants to the campus,” he said. “And there will be a sort of domino effect as folks expand and move – we’ll be able to backfill those spaces.”

Other additions

The addition of the Alliance Center also comes on the heels of a number of other new additions to the 1,125-acre campus. The university recently built a 1,195-bed student housing complex, and Cary-based Capital Associates has built The Greens at Centennial Campus, a 292-unit complex of three apartment buildings spread over 10 acres.

The university has partnered with a developer to build a conference center and hotel, but that project has yet to secure financing. The school also has rough plans for a Town Center project that would add 400,000 to 500,000 square feet of retail and residential space on the northeast shore of Lake Raleigh.

Davis said the recent uptick in new office construction in the Triangle is a sign that many tenants now feel a bit better about the future.

“I think they’ve held back for so long people are now trying to plan their future a little bit,” he said. “They’ve got a handle on what’s going on around this area – this area’s growing again, so everybody feels good.”

Bracken: 919-829-4548; Twitter: @brackendavid

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