Durham’s Mutual Tower signs tenant for new space, but office market remains ‘anemic’
For years, the iconic Mutual Tower in downtown Durham stood neglected and rundown.
That’s until its new owner, Turnbridge Equities, recently completed $10 million in renovations, updating the historic site with a new lobby, tenant lounge and gym. Now, the 14-story office tower is attracting “strong interest,” even as the Triangle’s office market remains inundated with available space.
The building, now called The Tower at Mutual Plaza, has signed financial services firm Edward Jones as pre-lease tenants for its spec suite program, its leasing agent CBRE|Raleigh told The N&O.
It will feature six full move-in ready spaces, ranging from 1,484 square feet to 4,018 square feet, encompassing the building’s entire fourth floor at 411 West Chapel Hill St. It’s expected to be complete this fall.
“Robust amenity packages and ready-to-go suites are what is driving tenant demands,” said Christian Sloan with CBRE|Raleigh’s Investor Leasing group. “Mutual Tower delivers both.”
‘Anemic’ with pockets of positive activity
The project’s early interest is a bright spot in an otherwise bleak office market as the rise of hybrid work, surging interest rates and tech layoffs push sublease vacancy rates to record highs across the Triangle.
It’s also another example of tenants’ continued “flight to quality,” say analysts. Newer or updated properties, particularly those in walkable, amenity-rich settings, have attracted the lion’s share of interest, at the expense of older assets, particularly suburban buildings.
Overall, the market’s vacancy dropped to 18.1%, according to CBRE Raleigh Research’s second-quarter market report. Nearly all the leasing activity occurred in top-tier properties, like Fenton in Cary, and the former PRA space at Raleigh’s GlenLake office park, it noted.
PolicyGenius also withdrew 48,380 square feet of sublease space in central Durham, while ShareFile leased two floors at Two Block[83] totaling 54,420 square feet.
At the other end of the spectrum, Citrix’s former headquarters is sitting vacant. Rebranded as 120 West, the 171,067-square-foot building is now available for direct lease in Raleigh’s Warehouse District.
“Tenant demand continues to be anemic across the market,” said CBRE Raleigh’s senior research analyst Elizabeth Gates. “But there are pockets of positive activity in select submarkets that offer the amenities and premium space.”
Sublease vacancy rates, meanwhile, haven’t budged.
Roughly 4.4 million square feet of sublease office space remains vacant across the Triangle, the report said.
That’s roughly 8.2% of overall market inventory and a steady record high, surpassing the previous high-water mark of 5.3% witnessed in the aftermath of the dot-com bust and the 9/11 terrorist attacks. In a balanced market, sublease availability is typically closer to 2% of inventory.
Hitting its peak?
While it remains to be seen if the region’s sublease vacancy has hit its peak, a number of new projects are in the pipeline.
More than 2.2 million square feet of office space is under construction across the Triangle. That’s down 44% from two years ago. Out of this inventory, roughly 1.4 million square feet is expected to be delivered by year’s end.
Notable projects underway include the new Bandwidth HQ at 2201 Edwards Mill Road, a two-building office campus totaling nearly 450,000 square feet.
Deliveries are expected to trigger “significant competition” for landlords over the next 12 to 18 months, but Gates remains hopeful for the sector’s resurgence.
“Fortunately, construction starts are essentially nonexistent,” she said. “[This] will aid the market in recovery once the current pipeline empties and economic conditions stabilize.”
This story was originally published July 27, 2023 at 8:30 AM.
