Editor’s Note: This WRAL TechWire’s Commercial Real Estate special report “Follow the Numbers” is supported by commercial real estate firm CBRE Raleigh.
RESEARCH TRIANGLE PARK – Despite recent rounds of tech layoffs and a still-rising interest rate environment, the future looks bright for commercial real estate in the Raleigh-Durham market, according to two of the region’s leading industry experts.
Tight lending and pandemic-related declines in office-space utilization began to soften demand for commercial real estate in the fourth quarter of 2022. “Those two factors have impacted commercial real estate and will continue to,” says Tom Fritsch, senior managing director of CBRE|Raleigh. The company is a joint venture among local principals and Dallas-based CBRE [NYSE: CBRE], the global provider of brokerage, tenant representation, property management and other real estate-related services. While it’s difficult to predict how long national headwinds will persist, Fritsch believes the Triangle is positioned to weather the softness and emerge in an exciting position.
As veterans of the region’s business leadership, Fritsch and his CBRE colleagues offer ten reasons for optimism about commercial real estate here:
- Population Boom – In late 2022, TechWire reported that Raleigh’s MSA, which includes Franklin, Johnston and Wake counties, enjoyed the second-highest percentage growth rate among similarly-sized U.S. regions between 2016 and 2021. That growth is expected to continue, surging from 1,474,600 in 2022 to 2,651,400 by 2060 — a 79.8 percent increase, according to Woods & Poole Economics, a Washington D.C. consulting firm that studies economic and demographic data. That will fuel development of new housing, as well as retail space and distribution facilities, according to Fritsch. “You’ve got to support this growing population somehow,” he says.
- Business-Savvy Leadership – Despite noisy social-policy differences that shake out along party lines, Democrats and Republicans routinely come together when it comes to supporting continued job creation, wage growth and business recruitment. The arrival of top tech names like Google, Apple and Meta in recent years is ample evidence that CEOs like working with Triangle leaders. In 2023, for the second year in a row, CNBC named North Carolina “America’s Top State for Business,” citing strong bond ratings and a recent run of prominent site selection wins.
- Ready Talent – Chapel Hill, Durham and Raleigh are home to three of the world’s top research institutions in UNC, Duke and N.C. State universities. They, along with smaller private campuses and seven community colleges, create a reliable flow of new workers equipped with the skills leading firms look for. “Companies coming to the region are clustering here for a reason,” Fritsch says. “They are looking for top talent for their companies.”
- Livability – A four-season climate and easy reach of both mountains and beaches have long made the Triangle a popular choice for new residents and businesses. Fritsch says executives visiting the region for the first time often comment about the abundance of undeveloped land, parks and greenways. “They are amazed at how green it is here,” he says. Commuting times, especially when measured against those of large northeastern metro areas, make the Triangle appealing to those hoping to leave and arrive home at a decent hour.
- Job Opportunities – Increasingly, Triangle transplants arrive here without a job offer in hand, confident that Raleigh-Durham’s strong labor market will quickly connect them to the right opportunity. “This migration may more often describe someone in the 20s, but there are also people doing this at the tail end of their careers,” Fritsch says. Growth in the region’s STEM jobs is particularly enticing, which tends to attract the interest of national commercial real estate investors.
- Geography – Access to markets from Maine to Miami has always given the Triangle an enviable advantage in attracting businesses of all kinds. More recently, Fritsch says additional connectivity between Raleigh-Durham and other important North Carolina economic regions is enhancing that appeal. Recruitment wins in Chatham County, for example, are pulling the southwestern rim of the Triangle closer to the northeastern tip of the Charlotte Region. He also cites momentum behind the NC Carolina Core initiative, which seeks to link Fayetteville and Sanford to Greensboro and Winston-Salem. “The U.S. Highway 421 corridor is very important,” Fritsch says.
- Economic Diversity – The region’s economy has historically been grounded by government and higher education employment. While those sectors continue to provide ballast against swings in the business cycle, Raleigh-Durham’s more broadly-diversified economic base creates stability for its real estate market. Advanced manufacturing, life sciences, digital gaming, specialty health care and professional services such as business analytics help even out the waves of boom-and-bust other regions experience. Fritsch credits Triangle area leaders who came together after the 2001 dot-com implosion to identify more sustainable industries on which business recruiters could focus.
- RTP 3.0 – Since its initial visioning in the 1950s, Research Triangle Park has leveraged the singular advantages of the region’s three research universities in capturing the imagination of tech-oriented companies. But Park planners restricted development of residential and retail properties – which are now part of the walkable environments today’s technology workers prefer. Barry Bowling, executive vice president at CBRE|Raleigh, expects that to change as RTP leaders seek county zoning changes that would create make the park a hub for “live-work-play” “RTP 3.0 is in its early stages,” says Bowling, who leads CBRE|Raleigh’s Land Services Group. “The growth of that area is going to be important to watch going forward.”
- Eclectic Communities – From Carrboro to Clayton, Triangle communities can accommodate the full complement of tastes among businesses and residents. Popular suburban destinations like Apex, Fuquay-Varina and Wake Forest have preserved their small-town charm while embracing steady waves of newcomers. Transportation improvements have dramatically improved the accessibility of once-remote Triangle municipalities like Creedmoor, Pittsboro and Wendell. At the same time, downtown re-development activity is re-energizing Cary, Durham and Raleigh. Fritsch is encouraged by the 2023 State of Downtown Raleigh Report detailing current trends and projections for population and business growth. He also is excited about plans for Dix Park, Downtown South and an expanded Raleigh Convention Center. “These are key parts of our ecosystem,” Fritsch says.
- Investments in Infrastructure and Sites – Economic development organizations are working with private allies and philanthropic partners to keep the region’s inventory of ready-to-go industrial properties aligned with the quick-turnaround needs of forward-thinking businesses. “Speed to market is important,” Fritsch says, especially in high-potential industries like life sciences. Nor to be overlooked are strategic plans by the RDU Airport Authority, including construction of a new $500 million runway. CBRE’s Bowling believes a longer primary runway will significantly close the distance between the Triangle and major business centers in Europe and Asia. “That will open up longer-haul flights that we can’t currently accommodate,” Bowling says.
Other reports in this series: