Durham-Chapel Hill MSA Industrial Market Report – Q1 2026
By Carey Greene, Senior Advisor / Partner
The industrial real estate market in the Durham–Chapel Hill MSA continues to transition into a more balanced phase as of Q1 2026, with rising vacancy, moderating rent growth, and a still-active development pipeline. While long-term fundamentals remain strong, near-term conditions reflect a market adjusting to several years of elevated construction activity combined with demand that, while positive, has slowed relative to recent peaks.
A snapshot of the Greater Durham industrial market and key trends follows. But first, an update on East Durham.
Goose Creek Outfall - Continued
This is a follow up to last quarter’s announcement regarding the effective moratorium in much of east Durham due to sewer capacity issues:
Following the December 19, 2025 “Letter to Industry” issued by the City of Durham regarding the Goose Creek Outfall basin, the City has now met with local landowners, developers, engineers, and other stakeholders to hear concerns about the significant development constraints imposed across East Durham.
While there is a clear push from the development community to accelerate the timeline for needed sewer infrastructure improvements, there do not appear to be any firm commitments or guarantees from the City at this time. As it stands, projects within the service area still face the requirement for Utility Extension Agreements, with no new sewer capacity anticipated until phased improvements are completed—currently projected into 2029–2030.
In the meantime, the practical effect remains unchanged: development activity is severely limited, placing downward pressure on land values and leaving some owners—who have already invested heavily in acquisitions, design, and engineering—facing multi-year delays before permits can be secured. The City has encouraged developers to discuss their plans as certain connections may be possible on a case-by-case basis.
Full City memo: https://tinyurl.com/5t4hh9xk
Key Market Indicators for Q1 2026
Market Total SF: 60.3MM SF
Vacancy Rate: 9.2%
Market Asking Rent: $11.74/SF
Market Asking Rent Growth: 3.0%
12 Mo Net Absorption: 437,000 SF
Under Construction: 3.2MM SF (6.8% of inventory, 47.8% pre-leased)
12 Mo Deliveries: 1.9MM SF
Avg Price per SF: $160 (last 12 months)
Construction, Absorption, and Vacancy
Industrial vacancy in the Durham market has continued to rise as new supply outpaces tenant demand. Over the past 12 months, approximately 1.9 million square feet of new product has delivered, exceeding the market’s long-term average and contributing to vacancy climbing to 9.2%.
Net absorption remained positive at roughly 437,000 square feet, but this is significantly below the historical annual average of approximately 1.4 million square feet. This imbalance between supply and demand has resulted in a continued loosening of market conditions.
Looking ahead, an additional 3.2 million square feet remains under construction. Vacancy is expected to continue trending upward through much of 2026 as this pipeline delivers.
Despite these near-term dynamics, much of the new inventory consists of modern Class A facilities designed to serve advanced manufacturing, life sciences, and logistics users—key sectors that continue to drive long-term demand in the Triangle.
Rent Growth Continues to Cool
Industrial rent growth in the Durham market has continued to decelerate, increasing approximately 3.0% year-over-year. While this represents a slowdown from peak growth levels seen in 2022 and early 2023, rent growth in Durham remains above the national average of approximately 1.3%.
Rising vacancy and increased availability—particularly among newer speculative projects—are creating more competition among landlords, which is expected to further temper rent growth in the near term.
Sales and Capital Markets
Investment activity in the Durham industrial market rebounded in 2025, with total sales volume reaching approximately $695 million—well above the 10-year annual average. Over the past 12 months, roughly 55 industrial transactions have occurred, broadly in line with historical norms.
Pricing remains relatively strong, with average sale prices around $160 per square foot, exceeding the national average. Cap rates have generally tracked national levels, with averages around 9.7% depending on asset quality and lease profile.
Institutional capital remains active in the market, highlighted by major transactions such as STAG Industrial’s acquisition of Triangle 55 for approximately $83 million ($244/SF). REIT participation has increased recently, accounting for roughly 20% of transaction volume over the past year.
Economic Development – Heating Up
The State of North Carolina announced 25 economic development projects with a total investment value of more than $3.6 billion and at least 3,305 jobs created in Q1 of 2026. While the number of major announcements in the Triangle was limited, Genentech will add a major expansion in Wake County to the tune of $650 million and 100 new jobs, making its total commitment about $2 billion in its Holly Springs East Coast manufacturing hub. The largest investment in the Triangle came just after the quarter ended. From the Economic Development Partnership of North Carolina:
AbbVie, one of the largest biopharmaceutical companies in the world, is creating 734 new jobs and investing $1.4 billion over the next four years in a new pharmaceutical manufacturing campus in Durham, Governor Josh Stein announced.
The first phase of construction of the 185-acre campus will include small volume parenteral (SVP) drug product manufacturing facilities, next-generation laboratories, a warehouse, administrative offices, and employee wellness facilities with room to support AbbVie’s growing pipeline. Construction is slated to begin this year and be completed by the end of 2028. Average annual wages at the facility will be over $118,000.
For more information: AbbVie Announcement
Major Takeaways from Q1 2026 – Carey’s $0.02
The Durham industrial market is continuing to normalize after several years of rapid expansion, with vacancy rising as supply outpaces demand.
Development activity remains elevated, with over 3.2 million square feet under construction, suggesting continued upward pressure on vacancy through 2026.
Rent growth is moderating but remains above national averages, reflecting the market’s underlying strength.
Capital markets activity rebounded in 2025, with strong pricing and continued institutional interest, though underwriting is becoming more cautious.
Long-term demand drivers tied to life sciences, advanced manufacturing, and population growth remain firmly intact.
Near-term risks include elevated vacancy, slower absorption, and economic headwinds tied to reductions in research and education funding.
Sources: CoStar; Economic Development Partnership of North Carolina (EDAR); City of Durham; SVN Research
