The Triangle office market remains strong

RALEIGH – Office space remains in high demand across the Triangle, a new report from CBRE|Raleigh found, with the decreasing vacancy rates in the subsector demonstrating resilience in the local economy despite economic headwinds.

Office demand persists, the report found, with vacancy falling to 12.3%. Further, the report showed that rental rates increased 4.0% year-over-year to $31.68 per square foot.

“The rapidly growing Raleigh-Durham market is among the best positioned regions in the nation to weather the challenges presented by anemic office utilization and macroeconomic headwinds,” the report reads.

Another recent report from CBRE found that the Triangle is among the best technology jobs hubs in North America. But in the overall office market, the CBRE|Raleigh study found that office-using jobs “surged by 7.5% between August 2021 and August 2022, and new and expanding companies have announced a record-setting 12,650 new jobs for the region thus far in 2022.”

Overall, that puts the growth of the office jobs market at 4.2% while the region’s unemployment rate has fallen to 3.3%, a decrease of 0.8% year-over-year, according to the report.

Report: Triangle commercial real estate market has ‘strong showing’ in second quarter

Vacancy rates down, but subleasing increasing

While the vacancy rate in the office subsector fell to 12.3% in the third quarter of 2022, sublease offerings are increasing, the report found.

Last quarter, vacancy rates were 12.5%, and a year ago, they were 12.9%, according to the report.

But more companies are firming up plans for workforce location, providing more clarity on when or whether workers may or must return to the office location for work. While Red Hat and Channel Advisor have made work policies on maximum flexibility, Bandwidth has announced a five-day in-office requirement for workers. Still, those are two ends of the extremes, the CBRE report notes.

“Most companies, however, are settling somewhere in the middle with a hybrid format,” the report states.

And as firms have settled into their plans, that’s meant that the subleasing market in the Triangle is showing more signs of an uptick, with offerings rising to 3.4 million square feet of office space available as of September 2022, according to CBRE|Raleigh.

That figure means that 5.7% of available office inventory was listed for sublease, which the report notes far surpasses the prior “high-water mark” of 4.1% in the early 2000s.

“In an environment where labor remains constrained despite softening economic conditions, some companies are opting to shed real estate rather than cut talent as they seek to manage costs,” the report notes. “While sublease space presents significant near-term competition for office landlords, the highest quality offerings provide tenants with attractive options to lease space without the soaring tenant improvement costs and construction delays.”

Already, some of the available sublease space that became available in the past two years has now been leased to organizations such as Apple, Google, Clorox, Gilead Sciences, and the University of North Carolina at Chapel Hill, the report noted.