Chapel Hill , Carrboro offer limited office space for growing businesses

Businesses are beginning to move away as office space becomes harder to come by in Chapel Hill and Carrboro.

Caktus Group , a web consultant firm, is moving to Durham after searching for adequate office space in the Chapel Hill-Carrboro area for more than a year .

Colin Copeland , chief technical officer for Caktus Group, said they wanted to be in a walkable area of downtown and to have enough space to grow, but Chapel Hill could not offer what they were looking for.

“I think there is a lack of larger office space in the downtown area,” Copeland said. “Chapel Hill has a lot of Class A offices and office parks that are a little further away, but if you wanted to be downtown, it is harder to find our specific needs. We are spread across four fleets and two different buildings, so it is better suited for us to go.”

Dwight Bassett, economic development officer for Chapel Hill, said the town has trouble leasing in two categories.

“We are having trouble with spaces under 10,000 square feet and over 50,000 square feet in walkable distances,” Bassett said.“The vast majority would like to be located there.”

Bassett said he met with the Caktus Group six months ago, but Chapel Hill could not meet their interests.

“They were afraid to commit because they felt they needed to push a little higher,” he said. “They are still looking to expand, and they wanted another 1,000 square feet.”

The town does not have data about businesses leaving Chapel Hill, but he said Caktus, Strata Solar and Blue Cross Blue Shield were examples of recent business leaving.

Launch Chapel Hill is an incubator that helps businesses grow into self-sustaining enterprises. Bassett said when Launch began, he knew Chapel Hill would have to figure out how to keep businesses that grew through Launch in the area.

He said he’s happy Keona Health , a graduating business of Launch, will sign a lease at Europa Center Office Building in Chapel Hill this week.

“The Triangle has about 50 million square feet of office space, and Chapel Hill has about three to four percent of that total market share in the county,” he said. “If Chapel Hill could reach 5 percent of the market, we could add tremendous opportunity for this region to provide room for office clients.”

Gary Hill , a senior associate at Chapel Hill real estate firm Avison Young, said the time it takes to get projects approved by town governments also factors into the cost of bringing a business to Chapel Hill and Carrboro. He said it typically takes between 18 to 24 months to get a project approved, and then companies still have to build.

“So with what it takes to get a project built, time which increases the owner’s carrying costs and the taxes, right off the bat an owner has no choice but to charge a higher rate to recover their costs,” Hill said in an email.

Annette Stone, economic development director for Carrboro, said the town is currently considering projects that will provide more office space.

“ Fleet Feet (Sports), we were able to retain,” Stone said. “They were looking for more space, and they will be going into 300 East Main Street. They have 45 employees that are spread out over town, but now they will have their own space.”

She said there is still more room left to be leased at 300 East Main, an additional 22,000 square feet at Shelton Station and about 8,000 square feet at 311 E. Main St.

“Carrboro has had a revolving loan fund for over 25 years that we can make available to business that are looking to expand or grow,” she said. “We try to provide the best support we can for business that want to stay here. It is simply a timing issue.”

Bassett also said there are developments in the negotiation phase, like the Obey Creek development, which will provide several hundred thousand more square feet of space.

Bassett said he was working with several businesses, but Chapel hill could not meet their desire at this time.

“One is looking for 50,000 square feet and one is looking for a place with 150,000 square feet,” he said. “They both would like to be in Chapel Hill. We aren’t technically competitive and our rent may be a tad higher, but businesses have a desire to be in Chapel Hill.”

Hill said things are looking up for the area. He said the vacancy rate for office space is at 14 percent , after reaching 23 percent three years ago.

“Obviously, it is coming along. It is what it is. There have just been years and years of hurdles that need to be overcome.”

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