By Carey Greene, Partner / Managing Director
Durham industrial vacancy reached 10.2% in Q3 2026 as new supply continued to outrun demand. Absorption is still positive, the construction pipeline is shrinking, and rent growth remains well ahead of the national average. The Fed’s September rate hike, its first since 2023, adds a tougher financing backdrop.
A snapshot of the Greater Durham industrial market follows. But first, economic development, where the story this quarter is Sanford.
Economic Development – Sanford Steps Up
Lee County landed two major life science manufacturing projects just south of Chatham County. STERIS will invest $600 million and create 335 jobs in a 600,000-SF campus (announced August 5). Just after quarter-end, Bracco Imaging announced a $230 million, 200-job sterile injectables plant, its first in the U.S. (October 27). Several other unnamed Lee County manufacturing projects are also working through incentive approvals.
Sanford sits just outside the traditional Durham market, but these projects pull manufacturing and supplier demand toward the Chatham–Lee corridor, where much of greater Durham’s recent industrial development has occurred. In Durham itself, AbbVie’s $1.4 billion campus (announced in April) remains the largest project, though CoStar notes job growth has stalled amid federal research and education funding cuts. On VinFast, discussed in our update last quarter, the state’s lawsuit to reclaim the Moncure site is still pending.
For more information: STERIS announcement | Bracco announcement
Key Market Indicators for Q3 2026
Market Total SF: 61.3MM SF
Vacancy Rate: 10.2%
Market Asking Rent: $11.90/SF
Market Asking Rent Growth: 3.3%
12 Mo Net Absorption: 403,000 SF
Under Construction: 2.0MM SF (4.2% of inventory, 73.4% pre-leased)
12 Mo Deliveries: 2.0MM SF
12 Mo Sales Volume: $338MM (32 transactions)
Avg Price per SF: $163 (last 12 months)
Market data per CoStar.com
Construction, Absorption, and Vacancy
Vacancy rose to 10.2%, up from 9.7% last quarter and 7.4% a year ago, and above the 8.1% historical average. Logistics space (14.9% vacant) and North Durham (18.8%), Chatham County (15.6%) and South Durham (13.0%) are carrying the most vacancy, while Orange County (4.8%) and Research Triangle (7.8%) remain tight.
Net absorption stayed positive at roughly 109,000 SF in Q3. Trailing 12-month absorption of 403,000 SF is still far below the 10-year average of 1.4 million SF, with Orange and Chatham Counties leading. Notable Q3 leases included AP Emissions Technologies (207,200 SF) in Chatham County.
The supply side is easing. The pipeline is down to 2.0 million SF, from 2.7 million last quarter and 3.2 million in Q1, and no construction is underway in North Durham. The 73.4% pre-leased figure is inflated by the roughly 955,000-SF VinFast building; excluding it, the pipeline is about 1.06 million SF and roughly half pre-leased. CoStar forecasts vacancy easing to about 9.8% by year-end and 8.3% by the end of 2027.
Rent Growth Continues to Cool
Asking rents are $11.90/SF, up 3.3% year-over-year versus about 1.3% nationally, but that is the continuation of a four-year slowdown from the 2022 peak. Quarter-to-date annualized rents are slightly negative in every submarket, a sign landlords of newer speculative space are competing on price.
Sales and Capital Markets
Investment activity has slowed. Trailing 12-month volume of $338 million across 32 sales compares with 10-year averages of $378 million and 56 deals. Pricing remains solid at about $163/SF, ahead of the $159/SF national average, with a 7.2% market cap rate.
Q3 still produced two large trades: FedEx Ground’s $58.8 million ($172/SF) purchase of its 342,000-SF Chatham County facility, and JLL Income Property Trust’s $53.4 million ($286/SF) acquisition of 47 National Drive. Institutional investors and REITs continue to account for most volume.
Capital Markets Backdrop
The Fed raised rates 25 basis points on September 16 to 3.75%–4.00%, and the 10-year Treasury closed that day at 5.01%. Policymakers now project one more hike this year, 2027 rates of 4.00%–4.50%, and no return to 2% inflation until 2029. August CPI was 3.4% year-over-year, with energy prices pushed higher by the Iran conflict. Industrial pricing nationally is roughly flat year-over-year, though national rents are still up about 3.9% and logistics activity remains well above its long-run average. Higher construction costs, including the 50% steel and aluminum tariff, continue to pressure new development.
Major Takeaways from Q3 2026 – Carey’s $0.02
Vacancy rose to 10.2%, but the construction pipeline has shrunk to 2.0 million SF, which sets up easing vacancy in 2027.
Demand is positive but uneven. Orange and Chatham Counties are absorbing space, while North and South Durham logistics buildings carry the most vacancy. Tenants have leverage in those submarkets.
Rent growth of 3.3% is still more than double the national average, but asking rents are softening in every submarket.
Sales volume is below average, but pricing remains above the national average and large institutional trades are still happening.
The Fed’s September hike and a 10-year Treasury near 5% make higher-for-longer financing a multi-year reality.
Economic development is shifting south and west, with STERIS and Bracco putting Sanford on the map. Watch the Chatham–Lee corridor and the unresolved VinFast site.
Long-term drivers in life sciences, advanced manufacturing and population growth remain intact. Near-term risks are excess vacancy, federal research cuts and higher rates.
Sources: CoStar; SVN Research; Federal Reserve; Bureau of Labor Statistics; MSCI-RCA; Columbia CompStak; Office of the Governor of North Carolina; WRAL
