Tom Fritsch, Senior Managing Director, CBRE

Invest: spoke with Tom Fritsch, senior managing director of CBRE, about the shifts shaping Raleigh-Durham commercial real estate, from data centers and life sciences to office utilization, industrial supply, and retail fundamentals. “I continue to remain extremely bullish on continued growth and investment here,” Fritsch said.

How have you seen the commercial real estate industry change over the past year, and how has that shaped CBRE’s approach?

Data centers have become a major focus. The Carolinas have been in the spotlight as a strong option for those projects, and we have seen a big uptick tied to AI and other users. We have been in the data center business for a while, but there has been a significant increase in attention and activity. The open question is sustainability, especially with the power demands these facilities require, and whether that pace can be maintained.

Another change is that capital markets are making a comeback and becoming more active than they were last year. Last year was more active than 2024, and 2024 is really when it slowed down. Slower investment sales and lender access resulted in increased owner-user sales across sectors.

Industrial onshoring has played a role, and return to office, albeit at a slow pace, is making a gradual recovery. It is just going to take time. And then life sciences, particularly here, has been significant, with companies planting their flags and making long-term commitments in mind.

With life sciences continuing to anchor regional development, what’s your view on the long-term sustainability of that momentum and its impact on real estate strategy?

I tend to look at life as a pendulum. With office, for example, I do not think we are going to be where we were in 2018, but I also do not think we are going to be where we were in 2020. I think it falls somewhere in the middle. Overall, we expect a more optimistic trajectory in 2026 as demand stabilizes.

For life sciences specifically, I do not have a crystal ball, but I do not see any signs of that slowing down currently. We have had some fairly large life sciences transactions, and several large life sciences tenants have been announced in the past six months. There have been major wins on the GMP side, and there were some deals announced toward the end of last year.

Despite vacancies and funding challenges, major pharma companies continue to invest heavily in new facilities here. Billions of dollars are flowing into manufacturing facilities as well. Again, no crystal ball, but we do not currently see signs of that slowing down right now.

How are evolving tenant expectations influencing the way you approach office leasing and property management today?

More companies are achieving their desired office attendance. Interestingly, we are still talking about office use now, years later, but we are. Continued decisions are being made with more confidence about what companies need, what their work model is, who wants to have people back in the office or needs to for their business, and who does not.

We are in the middle of companies trying to understand how AI is going to affect occupancy, usage, and employee headcount. I think that story is still to be written.

We have spoken about the flight to quality for a while. A lot of companies were going to the prime, top-tier buildings that are highly amenitized and the highest cost. A lot of that has been absorbed, and now we are seeing more firms looking at the broader Class A and B+ segment. A lot of that is driven by price point. There can be a significant swing between the rental rate of a Class A fully amenitized building, or even prime, versus a B building.

B product may not be located as well, may not be as amenitized, and may not have the same walkability around it, but we are seeing an uptick, which we expected at some point. Not every company can afford the most expensive options. There are places for different price points, and we are seeing that now in office, particularly because Raleigh has a healthier blend of tenants with utilitarian needs compared to other markets, where tenants often prioritize prime space.

The next question mark is what happens to the next tranche of buildings, which are really Class C. They are not well amenitized, may not be in the best shape, and may not compete as effectively. That is where you get into the conversation of some buildings being demolished and repurposed as land, and in some cases, when it works, being changed to other uses.

What dynamics are you seeing in the Raleigh-Durham office and industrial sectors, and how are supply and absorption trends playing out across submarkets?

Owner-user sales have increased as major occupiers (including large logistics and e-commerce users) shift more toward ownership and self-development. Raleigh-Durham continues to benefit from onshoring trends, though 2025 brought a period of caution tied to macroeconomic and geopolitical factors.

Construction is outpacing absorption, and that will likely continue in 2026. That said, there has been good leasing activity.

Industrial is also seeing the effects of the flight to quality. More modern assets with higher clear heights and superior access are highly sought after. Also, not everyone is going to pay the premium for the highest-end product, so there is still demand across pricing tiers.

Mid-sized activity, roughly 30,000 to 60,000 square feet, remains steady. Retailers, e-commerce, and third-party logistics providers continue to consolidate networks, pushing average deal size into the 100,000-square-foot range.

In office, one advantage of Raleigh is that the market is more spread out than many cities that have a single central business district. We have Raleigh, we have North Hills or Midtown, we have Durham, and we have other sectors. People have choices among hubs.

We are also seeing a reemergence of Research Triangle Park, where land use and development pathways are opening up. In many cases, the decision is still driven by quality, even if that means a strong B building compared to a weaker C building, more than it is driven by one single district versus another. While some Class B and C buildings may be located in less desirable areas, their classification is mostly determined by factors like building age, functional limitations, and aesthetic obsolescence.

One additional dynamic that is important is that new prime office development is largely concentrated in Midtown. Two significant towers have been delivered recently with more on the way, while development elsewhere is limited. This creates an imbalance in both product type and geographic options for tenants. 

As retail demand shows signs of selective recovery, how are you advising clients to think about site selection, tenant mix, and repositioning opportunities?

Retail in Raleigh is extremely tight. We have the lowest retail vacancy in the United States, which is an interesting statistic. We expect retail vacancy to remain stable this year.

Supply is currently restrained by high construction costs and a challenging capital markets environment, similar to office. We do expect retail construction to begin to rebound in 2026 and into 2027.

Retail rents continue to set all-time highs. We are seeing rents around $50 per square foot in downtown Raleigh and in the Midtown submarket, with even higher levels in parts of Midtown. Downtown Raleigh is recovering faster than downtown Durham, which is an interesting dynamic.

A lot of the development interest we have seen over recent years has centered on mixed-use projects, with a retail component alongside office and often multifamily. Locally, we did not see the idea that brick-and-mortar retail was going away play out the way some expected after the initial COVID disruption. Once things started to return to normal, retail here continued to perform well.

Nationally, retail completions and net absorption have been muted for the reasons I mentioned, but in Raleigh, the combination of limited supply and ongoing demand has kept fundamentals strong.

With more than a decade leading CBRE in this region, how has your approach to growth, client service, and leadership evolved as the Triangle has matured?

When COVID hit in 2020, we started receiving calls from outside the market, investors and developers from primary markets like New York, Chicago, and the West. They wanted to diversify, and I think that expedited our maturation as a market because we had a lot of dollars start to come here that may have eventually come here, but not as quickly.

That has slowed, but it has not stopped. In-migration is still happening, and we are fortunate for the positive economic impact that brings. I continue to remain extremely bullish on continued growth and investment here. I really do. I just do not see signs of that slowing down right now.

Before we wrap up, are there any important topics we did not cover that you think matter for 2026 and beyond?

AI is the topic everyone is talking about, and what impact that is going to have. That also connects to data centers because you have to have data centers to support AI and related uses.

Overall, we have covered the major themes. Data centers will be important to watch, life sciences continue to be strong, and we are seeing a nice uptick in activity. Multifamily in Raleigh-Durham is also recovering after a supply surge in recent years. Construction is now slowing meaningfully, which supports the market normalizing.

Rent growth remains soft with high concessions, given the recent supply wave, but absorption is beginning to exceed deliveries, and investment sales are regaining momentum. Our brokers and producers across the board are feeling fairly good about this year. Even though we are early in the year, it has been an active beginning compared to what I have seen in prior years, and hopefully, that is another sign that things are going to go well this year.