Durham Office Market: Rising Demand and Low Vacancy Drive Steady Growth

Despite ongoing shifts in how and where companies utilize office space nationwide, the Durham office market has proven notably resilient. Recent data indicates local fundamentals—such as rent growth, vacancy rates, and absorption—are performing better than in many other parts of the country. Below is an overview of the current state of the Durham office scene, based on trends observed through early 2025.

Steady Leasing and Below-Average Vacancy

Where many U.S. metro areas continue to see rising vacancies and sluggish leasing activity, Durham appears to have stabilized. The local vacancy rate hovers under 10%—significantly healthier than the national office vacancy average of around 14%. Over the past year, the market managed positive net absorption (93,000 square feet), albeit at a more modest clip than its historical annual average of about 400,000 square feet. In a climate where many prospective tenants remain cautious, Durham still outperforms.

Subdued Yet Positive Rent Growth

Asking rents in Durham rose roughly 1.8% over the past year, markedly slower than the heady 4.6% surge seen in early 2024, but still on par with the U.S. average. While the velocity of rent increases may have tapered off, the fact that rents remain in growth territory speaks to the market’s underlying resilience. Landlords typically cannot command rapid rent hikes in a cautious environment, so incentives such as extended free-rent periods or enhanced tenant improvement packages have become more common. Even so, occupancy remains respectable, especially among newer, higher-end (4 & 5 Star) properties.

Limited New Construction

Among the most striking differences between Durham and many larger office markets is the near absence of large speculative projects. High development costs, pricier financing, and broader uncertainty about long-term office demand have cooled the local construction pipeline. Over the past year, roughly 140,000 square feet of new inventory hit the market—well below Durham’s 10-year average. Further, no new groundbreakings are on the immediate horizon, meaning future supply pressure on vacancy rates should stay minimal. This construction lull has been especially noticeable in the once-bustling Research Triangle Park area, where developers remain cautious despite strong fundamentals in life sciences and R&D.

Sublease Space: A Manageable Concern

Another national headwind—surging sublease availability—has somewhat affected Durham but not to a breaking point. A few larger blocks of sublease space remain on the market, generally tied to companies consolidating footprints or adopting hybrid schedules. The most significant sublease listing involves former corporate campuses in Research Triangle Park, but brokers note consistent inquiries from mid-sized tenants drawn by flexible terms and below-market rents. So far, this influx of sublease space has not pushed vacancy upward in a dramatic way.

Economic Drivers Bolster Demand

Behind Durham’s relative office-market stability lies its robust and diversified economy. Duke University, North Carolina Central University, and nearby University of North Carolina at Chapel Hill steadily replenish the workforce pipeline. Meanwhile, established powerhouses—such as IBM, Fidelity, Cisco Systems, and various biotech and pharmaceutical firms—continue to invest in the area. Ongoing expansions in manufacturing, technology, and life sciences help sustain local employment growth above the national pace. As new jobs get created, even in advanced manufacturing or R&D settings, a portion of that activity filters into the office sector for headquarter or administrative functions.

Outlook: Slow and Steady Wins

Looking ahead, Durham’s combination of strong economic fundamentals and limited new construction should preserve relatively low vacancies and positive rent growth. While local landlords cannot expect the robust rent inflation of recent boom years, modest gains are likely to continue in an environment with constrained supply. The office market’s biggest challenge will remain the same as everywhere else: navigating long-term shifts in corporate footprints driven by hybrid and remote work models. Yet if any mid-sized metro is positioned to handle those headwinds, it is Durham—where high-quality talent, a thriving innovation ecosystem, and comparatively affordable real estate bode well for sustained office demand.

In short, while the national narrative might focus on the office sector’s struggles, Durham stands out as an exception. With steady local leasing, a strong knowledge-based economy, and virtually no new speculative developments on the immediate horizon, the city’s office market appears poised for continued health—albeit with a slower growth trajectory than in the most expansionary years. This stability, tempered by measured rent increases and tempered construction activity, makes Durham’s office market a rarity in today’s challenging commercial real estate landscape.

April 17, 2025 by Michal Mohelsky, J.D., principal of MMCG invest, LLC, SBA feasibility study consultant

Sources: Statista, Moodys, MMCG database, CMBS