Editor’s Note: This WRAL TechWire’s Commercial Real Estate special report “Follow the Numbers” is supported by commercial real estate firm CBRE Raleigh.
RALEIGH – Higher prices? Rising interest rates? An imminent recession? These may be concerns, but they haven’t managed to dampen retail real estate in the Triangle, which stands on firm ground according to the latest assessment by CBRE|Raleigh.
From July 2022 through the end of June of this year, Raleigh-Durham’s retail market absorbed 543,826 total square-feet, CBRE found, including 39,354 sq.-ft. in the first six months of 2023. While vacancy rates rose slightly in the first half of the year, they are down by 90 basis points (or nine-tenths of a percentage point) year-over-year.
CBRE Retail report mid-year 2023
“For the Triangle economy, we’re seeing all boats rise,” says Tiffany Barrier, senior vice president at CBRE|Raleigh, a joint venture among local principals and Dallas-based CBRE Group, Inc. (NYSE: CBRE).
Its semiannual regional retail real estate analysis examined activity in Durham, Orange and Wake counties.
At the pandemic’s worst, remote work boosted traffic at suburban shopping centers, largely at the expense of downtown retailers. But as workers in the region return to their offices, the situation is correcting itself. “Coming out of COVID, downtowns were really hurting,” Barrier says. “But more recently, we’re seeing a resurgence in downtowns.”
The long-term impact of pandemic-driven changes to how and where people shop, dine, exercise and enjoy entertainment remains unclear. “It’s an interesting dynamic,” Barrier says. “We’re getting asked about it a lot.”
The collapse of household-related goods retailers Tuesday Morning and Bed, Bath & Beyond impacted absorption in the region. Bed, Bath & Beyond, for example, closed its five Triangle locations, which moved 179,000 sq.-ft. of space onto the market. But new tenants have been secured for each of the chain’s Raleigh-Durham stores, CBRE reports. Barrier doubts the high-profile bankruptcies portends any broader troubles for home-accessory retailers, most of whom flourished as the pandemic launched a tsunami of refurnishing and remodeling by house-bound workers. “It was more likely the case of two brands that were really struggling to stay relevant,” she says.
Redevelopment work at several longtime retail complexes accounts for much of the 521,109 sq.-ft of retail space currently under construction in the Triangle. At Raleigh’s Village District (formerly Cameron Village), the K&W Cafeteria has been leveled to make way for a 153-room Hilton Curio Collection hotel to be called The Oberlin. Barrier and her CBRE colleagues are now working to fill the property’s top-floor restaurant space, a 5,600-sq.-ft. dining area that will feature views of the downtown skyline. Work is also underway on new apartments and parking facilities at the Village District. Expect more dinner-focused eateries there, too. “They are looking for more of an evening draw,” Barrier says, referring to the District’s owners and management.
Planning officials in Cary are now reviewing a rezoning application for an ambitious plan to transform Cary’s long-struggling South Hills Mall into a mixed-use destination that would include as much as 550,000 sq.-ft. of new retail space and 350 hotel rooms. The 44-acre site could also include a significant new community and recreational sports center town leaders have been envisioning. Strategically situated at the busy junction of I-40, I-440 and U.S. Highway 1, “that whole chunk of property has been underutilized,” Barrier says. The mall, Cary’s oldest retail complex, was originally built in the early 1970s.
From 1942 to 1986, Seaboard Station facilitated passenger rail travel from downtown Raleigh across the East Coast. Today, construction cranes tower over the nine acres adjacent William Peace University as Hoffman & Associates executes a multi-phase redevelopment vision. Already complete is 30,000 sq.-ft. of retail space at The Signal, a 298-unit apartment building. A second phase involves another 55,000 sq.-ft. of retail space at a two-building complex that will include 279 residential units. Also now under construction is a 149-room Hyatt House hotel that will overlook Peace Street and the northern end of Halifax Mall. Phase 3 will involve a separate series of mixed-use buildings that will supplant the current site of Logan’s Garden Shop. New York-based Turnbridge Equities is leading that phase, which will include relocating the historic train station to the northern rim of the property.
Expect ample food and beverage concepts to find their way to the new Seaboard Station, Barrier says, including “first in market” tenants. She expects the emerging Seaboard Station to have better pedestrian connections with the nearby Mordecai and Oakwood neighborhoods. “It’s the first taste of a completely walkable urban community with entertainment and services – all without getting in your car,” Barrier says. She also expects Seaboard Station to blend new properties with older spaces that will undergo adaptive reuse. The “old building feel” will serve as an homage to the location’s storied past.
Will Gaskins, vice president of economic development and planning for the Downtown Raleigh Alliance, believes the changes at Seaboard Station will forge closer connections with the Person Street business district and the state government complex. “It’s going to be very transformational,” Gaskins says. “It’s going to dramatically change the look and feel.”
Hoffman & Associates, which is based in Washington, DC, and Turnbridge have each built solid track records in neighborhood redevelopment. “They think more about how all the pieces fit together,” adds Gaskins, who says the current phase at Seaboard should be complete by late next year. There are currently no plans to redevelop “Block D,” the onetime cotton warehouse now home to Hoffman’s Raleigh offices, O2 Fitness, Westlake Ace Hardware and several other retail businesses.
Gaskins’ 12-employee organization advocates on behalf of economic and community development in downtown Raleigh, supporting new and expanding firms on their real estate, financial and technical needs. The Alliance also gathers data that can help guide planning by local retailers and start-ups. “We work directly with entrepreneurs,” says Gaskins. The group’s 2023 “State of Downtown Raleigh” report depicts a thriving retail economy driven by rapid residential growth, robust visitor activity and the addition of Class A office space. “Tourism has come roaring back,” Gaskins says, resulting in steady traffic into downtown restaurants, bars, coffee houses and shops. In 2022-2023, the city center welcomed 3.7 million unique visitors, according to the Alliance.
Just over 57 percent of downtown Raleigh’s storefront businesses are minority- and woman-owned firms. “That’s super-exciting for us,” Gaskins says. COVID-19 sparked a wave of career soul-searching for many, with entrepreneurship being a popular solution. “The pandemic shifted lives and shifted markets,” according to Gaskins. “But that upheaval also created new markets and new opportunities.”