The Downtown Raleigh Alliance published its latest breakdown of the city’s current and planned developments, weekday visitors, food and beverage tax revenue, and other trends.
The 20-page report outlines several recent wins for downtown Raleigh, paving the way for a strong 2024. More than 50 new storefront businesses opened last year, including 15 in the fourth quarter. The latest entrants to the downtown community include bars like The Devereaux, which opened in January alongside sister restaurant Prospects, and Umbrella Dry Bar, Raleigh’s first non-alcoholic bar. The city also welcomed new retailers like Downtown Kicks and the Self Care Marketplace, as well as out-of-town expansions such as Incendiary Brewing, stemming from one of Winston-Salem’s top breweries, and Flavor Hills, an expansion of the flagship restaurant in Jacksonville.
With 25 downtown businesses closing in 2023, the year brought a net gain of 31 storefront operations overall. Ten businesses closed last quarter, including four restaurants, the Atlantic Lounge bar, and three retail spaces: Lip Print Beauty Bar, ZEN Succulent and Black Friday Market.
Meanwhile, 27 storefront businesses have announced plans to open soon, including several restaurants, an ABC Store and Body Fit Training, a fitness service provider.
From January to November, downtown food and beverage businesses generated an estimated $280 million in sales, with $24.6 million in the fourth quarter. Average monthly sales clocked a 4.6% increase over the same period in 2022. Growth was particularly high in the Fayetteville Street District, up 6.7% year-over-year, though Glenwood South was the leading money-making hub, accounting for 38% of the five districts’ sales.
Though visitor counts fell slightly in the fourth quarter, the year ended strong with 19 million people visiting downtown, up 3.7% from 2022. The highest daily tally happened in September during the IBMA World of Bluegrass Festival, followed by New Year’s Eve.
Visits pick up as pandemic rebound continues
On weekdays, the downtown Raleigh population typically consists of 51% visitors, 17% residents and 32% non-resident employees. All three categories have steadily recovered since the onset of the pandemic in early-2020. This leaves the daytime population with a 77% improvement compared to the fourth quarter of 2019 and a 3.9% year-over-year increase.
In the fourth quarter, downtown averaged 50,309 non-resident employees, visitors and resident visits each weekday during work hours. To obtain this metric, Downtown Raleigh Alliance used data from Placer.ai, a California startup with a proprietary algorithm that tracks foot traffic based on anonymized geolocation data from 30 million mobile devices.
The number of weekday daytime visits in downtown Raleigh has steadily rebounded from the COVID-19 pandemic. Source: Downtown Raleigh Alliance
The study compared the data to nine downtowns nationwide, including four others in North Carolina. Both downtown Raleigh and Durham led recovery in the national peer set. Durham’s recovery rate is 79.5% since 2019, and Raleigh’s 77% figure ranks second. Still, the City of Oaks’ 4% year-over-year growth fell short of other metros like Seattle (10%), Durham (7%), Greensboro and Charlotte (both with 5%).
This number differs from the frequently cited University of Toronto Downtown Recovery Index, which ranked Raleigh’s recovery No. 59 in the nation at 63% in the last update in October. Unlike the Downtown Raleigh Alliance’s approach, this statistic is based on overall device activity regardless of times or days of the week. It also uses a different downtown boundary. A recent city-defined boundary was added last November that matches the boundary used by the Downtown Raleigh Alliance, showing an 81% recovery rate.
Weekday visit data indicates downtown Raleigh’s post-pandemic recovery outperforms other metros. Source: Downtown Raleigh Alliance
Downtown Raleigh continues to add apartments and other developments
Downtown Raleigh’s development pipeline is seeing significant investment, including $3.8 billion in proposed or planned developments and $911 million under construction. The 18 projects currently being built total 2,230 residential units, 410 hotel rooms, 11,200 square feet of office space and 116,616 square feet of retail.
Forty-four planned or proposed developments would add another 7,221 residential units, 1,840 hotel rooms, and more than 587,000 square feet of office space and 242,000 of retail space.
Construction recently launched on The Bend retail development, comprising 3,350 square feet of renovated retail and restaurant space across three converted houses.
East Civic Tower has also started site preparation work with a $206 million construction budget. The 17-story building, expected to be completed by 2024, will house city staff, the City Council and other boards and commissions. Earlier this month, builders demolished the old police headquarters and a tunnel at the site.
The Downtown Raleigh Alliance report also cites major developments completed last year like 400H, a 20-story mixed-use development with 242 apartments and more than 161,000 square feet of office and retail space. Renters started moving in last fall.
400H, a 20-story mixed-use development, is among the latest additions to downtown Raleigh’s skyline. Photo source: 400H (via Instagram)
Raleigh office occupancy higher than national average
Downtown Raleigh is home to 44,000 employees within a mile of the State Capitol. The Downtown Raleigh Alliance reports that Class A office space occupancy was 82.9% in 2023, with an average rent of $37.35 per square foot. Direct Class A vacancy ended the year at 11.7%, which does not include sublease space ready for immediate occupancy. Net Class A absorption for the year — the sum of square feet tenants moved into minus the sum that became vacant — was 22,612 square feet. Total office inventory stands at more than 6.2 million square feet.
This comes as national office vacancy rates reached a record-breaking 19.6% in the fourth quarter, according to Moody’s Analytics. Downtown Raleigh’s direct vacancy rate was 14.7% over the same period, per Cushman & Wakefield.
Fourth-quarter data from CBRE indicates that office sales fell throughout 2023 across the Raleigh-Durham market due to higher interest rates and concerns over office utilization. Investment volume totaled $555 million, down from $1.6 billion in 2022 and the lowest annual level since 2013.
CBRE’s report also notes that more distressed sales started trending in late-2023 as owners struggled to refinance maturing loans. In downtown Raleigh, local restaurateur Lou Moshakos of LM Restaurants bought 227 Fayetteville St., a Class A property, at an auction for $14.9 million.
Remote work, economic uncertainty continue to weigh on Triangle office market
More than 11,000 call downtown Raleigh home
As for residential space, the Downtown Raleigh Alliance reports that downtown Raleigh’s stabilized occupancy rate is 94.1%, not including recently completed developments. The city is home to more than 11,000 residents.
Downtown occupancy remains higher than city-wide stabilized occupancy as new deliveries continue. Residential inventory stood at 8,897 units in the fourth quarter. Rent per square foot ended the year at $2.13, down 7.4% year-over-year thanks to new supply. Nearly 1,000 residential units were delivered in 2023. Another 2,230 are under construction, and 7,221 have been proposed or are in the planning stages.
