RALEIGH – Development continues across Raleigh with thousands of new residences, hotel rooms and space for offices as well as retail despite an economy afflicted with inflation and high interest rates, according to a new report from the Downtown Raleigh Alliance.

“Despite macro trends, such as increasing office availability, we continue to see positive numbers within the data in Downtown Raleigh— both Class A Office Net Absorption and Direct Office Net Absorption were positive for Q1 of 2023 (according to data from commercial real estate firm CBRE). This means that high quality office space and new space that is being delivered is continuing to lease at a net positive,” says Will Gaskins, vice president of Economic Development at DRA.

The same holds true for residential, he adds.

“On the residential side, downtown is continuing to add density with over 2,000 units currently under construction,” Gaskins reports. “This balances the mix of uses across downtown, providing consistent vibrancy and spending power to support local businesses.”

His comments to WRAL TechWire came via email for a report about the challenges facing the Triangle’s commercial real estate sector and ahead of the Alliance’s newest report last week.

Towering challenges: Triangle commercial real estate sector faces ‘very real’ headwinds

Highlights from the report

Here are key data points from the alliance report citing various data sources:

  • There are 16 developments under construction and when completed they will deliver 2,032 residential units, 408 hotel rooms, 144,410 square feet of office space, and 89,145 square feet of retail.1
    There are an additional 41 projects planned or proposed including five in site preparation.
  • The Signal apartments, the first building among three in the multi-phase Seaboard Station development, delivered 298 apartment units in March of 2023. The Signal is the first apartment development to deliver in downtown since The Line’s 283 units at Smoky Hollow.
  • 320 W South, a 296 unit development with 10,000 square feet of retail, joined 10 other residential projects under construction.
  • The Platform at 600 W Cabarrus has topped out and will add 442 residential units plus 26,000 square feet of retail in the growing Warehouse District later this year.
  • An additional 8,558 units in 26 developments are in site preparation, have been proposed, or are working through entitlement.
  • Downtown’s stabilized occupancy rate, which does not include recently completed developments in lease-up phase, remains high at 94%.
  • 400H has topped out and is set to deliver 144,410 square feet of class A office space later this year.
  • Downtown’s overall direct vacancy rate ended the quarter at 12.3% while the average class A asking rate for rent is $35.52 per square foot.
  • Class A office direct net absorption for the quarter was positive at 26,354 square feet

‘Desirable’ market

Bottom line in Gaskins’ view:

“Downtown Raleigh is a desirable market that will continue to attract companies like the recent ProPharma headquarters announcement, which announced plans of adding approximately 75-100 new jobs and leased Class A space in the core of Downtown Raleigh.

“The Downtown Raleigh office market is also well positioned now and for the future. There is an incredible talent pool of people living in Downtown Raleigh that companies are attracted to and downtown has highly desirable urban amenities—like density, restaurants, storefronts and transit—that are unique in the Triangle market. The quality of the office space in downtown is also attractive as companies evaluate their footprints and move towards higher quality space in new leases.

“Sublet space like the former Citrix location are an incredible opportunity for downtown of unique, high-quality space in a great location that often is not available that presents significant economic development potential and attractiveness for a future tenant.”