DM: Two, three years ago, downtown Durham was red hot. Greenfire, Scientific and others were developing all over downtown. Then it stopped because of the recession. Give us a view of Duke’s perception of what happened, what’s happening now and a prognosis for the future.
SS: I will tell you downtown Durham is still red hot. It still has the highest rental rates and the lowest vacancy rates in the Triangle. We keep getting positive in-flow, positive absorption downtown, which you’re not seeing in other markets. The issue is on a more global basis, if you will. The economic recession has stopped the building and development process across the board because the banks don’t know how exactly to lend in this new market. So development has stopped or has significantly slowed down. But the market has not slowed down. We still have more people looking for large spaces that don’t exist downtown. You can’t hardly find 25,000 square feet of contiguous space in downtown Durham. The problem is we have 50,000-square-foot users and 75,000-square-foot users that are boxed out, and their credit is not strong enough to have a building built.
DM: Four years ago, the banks might have said, ‘Great. Build it.”
SS: Right. And now they won’t. That’s the change.
DM: What’s the average square-foot cost to lease office space?
SS: First-class office space is going to run you about $25 per square foot.
DM: Has that gone up or down?
SS: It’s ticked up because there’s scarcity. It’s absolutely supply and demand.
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