Vacant office space in Raleigh and Durham swell
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The amount of office space that companies are trying to sublease has grown significantly over the past year, according to data from the real estate services firm Cushman & Wakefield.
- In the first quarter of 2022, there were 2.4 million square feet of vacant sublet space in the Triangle, per the firm. That’s a 40% increase compared to the first quarter of 2021.
- The vacancy rate for subleased space was 4% in the first quarter, up from just under 2% the year before.
Why it matters: The rising number of subleases comes as companies across the country figure out how much office space they actually need as workers seek more flexibility in where they work.
In the Triangle, companies of various industries are downsizing citing the changing nature of work.
- The insurance company Arch Capital put two floors of the Dillon tower in downtown Raleigh up for sublease.
- Advance Auto Parts recently subleased several floors of its office tower in North Hills, according to Cushman & Wakefield.
- IBM put more than 600,000 square feet of its campus in RTP up for sublease.
- And GSK downsized from its 500,000 square foot campus in Research Triangle Park to 70,000 square feet in downtown Durham.
What they're saying: "We definitely have seen some more sublease space hit the market," Kristine Smith, a research analyst for the firm, told Axios. "It's not necessarily tenants leaving the market but downsizing."
- "They think offices will continue to be in need, and they still want to keep it," she added. "But they're just kind of still navigating" changes in employee behavior.
The big picture: Despite the number of companies moving to smaller spaces, the Raleigh office market is in a relatively healthy place. The vacancy rate in the Triangle, which was 12% last quarter, is below the national rate of 15%.
- Rents in Raleigh grew 6% compared to a national average of 4%, Ted Klinck, CEO of Raleigh-based office provider Highwoods, told investors last month.
The intrigue: More than 2.3 million square feet of office space is under construction across the Triangle, which should test the region's ability to maintain a below average vacancy rate.