Aug 2, 2023 - Development

Raleigh's office vacancy rate is expected to keep rising thanks to remote work

The entire Citrix building is available for sublet. Photo: Courtesy of CBRE

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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