Quarterly Office Demand Falls in Raleigh
Quarterly Office Demand Falls in Raleigh After Showing Signs of Rebound
Fewer and Smaller Deals Are Getting Done Compared to Previous Years
Costar
Nick Leverett
November 27, 2023
Demand for office space in Raleigh, North Carolina, has dropped sharply after experiencing modest increases in the previous three quarters as fewer, and smaller, deals are getting done.
Office leasing volume was just under 620,000 square feet in the third quarter, according to CoStar data. That is the lowest quarterly level in almost three years.
Last quarter’s level of leasing was a steep dropoff from the second quarter when leasing was over 815,000 square feet. Prior to the third quarter, leasing volume in North Carolina’s capital city had increased three quarters in a row, prompting hope among owners that leasing might eventually return to its historical level.
While overall leasing activity in Raleigh is lower, there are still tenants actively seeking space, Scott Hadley, vice president and principal with Lee & Associates, said in an email to CoStar, with interest strongest for first-floor space and for smaller suites. Tenants are also asking for shorter lease terms or modified terms to accommodate future changes in
their business.
Most of the issues affecting leasing in Raleigh are common throughout the national office market, such as economic headwinds and employees allowing more flexible remote work, Hadley said. However, Raleigh “remains a destination for businesses and investors … which is translating to continued, cautious, activity in the office market.”