Raleigh's office vacancy rate is expected to keep rising thanks to remote work
The demand for the Triangle's office space remains weak even as millions of square feet are about to come online.
Driving the news: The number of new office leases signed in the Triangle has dropped 35% year over year, as companies remain hesitant to commit to long-term spaces due to remote work trends, according to a quarterly report from the real estate firm Savills.
And the leases that are being signed are for smaller spaces than in the past.
- "You've got tenants looking to upgrade their space and relocating," Elizabeth Gates, senior research analyst at CBRE's Raleigh office, told Axios. But, she added, "they're taking a comparable size footprint or they're downsizing."
Why it matters: The weak demand comes as more than 3 million square feet of office space is ready to hit the market — either through construction or the expiration of subleases.
- That will send the Triangle's direct office vacancy rate of 13.3% sharply higher, according to CBRE.
State of play: The amount of sublease space available in the Triangle appears to have hit a peak of 4.4 million square feet, according to CBRE, after firms like GSK and Citrix listed huge amounts of their former office space.
- But 900,000 square feet of those subleases expire by the end of next year.
- At the same time, 2.2 million square feet of new construction — much of it around North Hills — will hit the market.
Yes, but: No new office construction is slated to break ground in the coming months, which could help the market stabilize in the coming years, Gates said.
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