A trio of brokers assess the state of commercial real estate in the Triad

Office values continue to drop with millions of Americans still working from home post-pandemic. Low demand and high interest rates have seen the office building sector continue to struggle across much of the country. But in the Triad, the commercial real estate market appears to be holding its own. 

In a recent survey, a majority of market analysts polled by CoStar, a leading industry source for commercial real estate information, expect office values to decline more than 20% this year. Meanwhile, investors in places like New York and Chicago are buying up large buildings in cash at a bargain and restoring them into living spaces. 

Nick Gonzalez is a commercial real estate broker with Linville Team Partners in Winston-Salem. He specializes in investment sales and says the devaluation here is not nearly as severe as in other parts of the country. One example is the 18-story 500 West Fifth Street skyscraper downtown purchased by Don Flow seven years ago. Gonzalez calls it a successful remodel of an old, functionally obsolete office building into a multi-use space.

"I think we’re probably going to see a few more of those," says Gonzalez. "The Truist building that’s here in downtown — used to be the SunTrust building — that’s one that’s probably ripe for someone to come in and reimagine. The challenge is construction costs."

Gonzalez says the cost of renovating old workspaces into residential or newer, in-demand offices has jumped substantially since 2022, leaving most developers unable to make them profitable for now.

Apart from those examples, Gonzalez says there’s a limited volume of distressed properties here. They’ve seen a little dip in suburban office sites but otherwise, the Triad appears to be weathering the storm for a few key reasons. The number one reason he says is jobs.  

Recent arrivals like Toyota Battery, Boom Supersonic, Nucor Rebar Fabrication and Excel Interior Door are slated to bring in hundreds of new employees, and along with them, thousands of additional secondary support residents.

In High Point, where office building assets are few and far between, the city has been largely immune from the sorts of property devaluations being seen in larger metropolitan areas. 

DeLille Field Commercial Real Estate managing broker Marc DeLille says even the impacts of higher interest rates on the market there have been minimal.

"Post-pandemic it completely rocketed," he says. "We’re starting to see a little bit of softening happening kind of due to interest rates. But a lot of cash deals have happened post-pandemic that didn’t require any type of bank financing." 

DeLille says retail space, industrial, and furniture market showroom activity have all remained strong in High Point. But when speaking specifically about the office market, that, he says, has been soft since the pandemic as large users have shrunk their footprint. He anticipates it staying that way for the next two to three years given evolving office and work-from-home arrangements across industries.

Cushman & Wakefield Executive Managing Director Bobby Finch also acknowledges that the Triad is not immune to some of the current challenges. He notes that in the first quarter of this year, the overall vacancy rates for offices rose by roughly 7% in Greensboro, twice that percentage in Winston-Salem and a slight bump up in High Point.

But he says with nearby colleges and universities, highway infrastructure and proximity to the coast and mountains, he’s optimistic.

"I really feel like we’re fortunate to be positioned where we are and I think that over the next 5-10 years I think we’ll see some exciting growth in all the office and industrial and residential segments of the market," says Finch.

For Nick Gonzalez, he, like many in his industry, is waiting for interest rates to come down. He says the Triad should be well positioned for what he calls a lot of strong growth in every segment of the industry next year. Especially, he adds, if that move is accompanied by a little softening on the part of lenders and more investors re-entering the marketplace.

And that return, says Gonzalez, is highly likely with November 5, Election Day,  on the horizon.  

"I have always had my best year ever following an election, and I don’t think this is going to be any exception to that rule," he says. "Because no matter how it goes, the uncertainty is off the table. At the beginning of this year there was a catchphrase amongst commercial real estate agents. And the catchphrase was ‘Survive until 25.’"

He says as office real estate markets across the country continue to see rising vacancy rates, many lack solutions to this mounting problem. He adds the Triad on the other hand may suffer from the same issue, but at least for now, the region is what he calls "Just one Toyota Battery plant away" from having plenty of options.