In this “Follow the Numbers” series, sponsored by CBRE Raleigh, WRAL TechWire will investigate local and national commercial real estate reports to better understand growth, trends, and outside interest in the Triangle and surrounding areas.
+++
Tip O’Neal, the legendary Speaker of the U.S. House in the 1970s and 80s, famously declared “all politics is local.”
The same appears to be especially true when it comes to issues of land use, according to experts from CBRE.
“It’s so local,” says Chester Allen, executive vice president at CBRE|Raleigh. As a key member of the firm’s Land Services Group, Allen works closely with municipal and county governments on entitling sites for commercial, industrial and residential development. A joint venture among Triangle-area partners and Dallas-based CBRE (NYSE: CBRE), Allen and his team represent landowners – often multi-generational farm families – on property transactions.
“It’s not an instant gratification business,” Allen says. The work also involves interaction with attorneys, engineers and economic development professionals. Buyers and sellers must align on price, and multiple moving parts need to mesh: utility availability and capital conditions, for example. “All the dominoes have got to fall into place,” says Allen, whose 18-year career in the industry includes the last 10 years with CBRE. “But it is fun,” he admits.
Special report: Ten reasons why Triangle commercial real estate market will rebound
Making matters even more interesting are the changes that can take place in communities as politics shift and new leaders enter with different ideas about development. With the City of Durham’s recent election of a new mayor and council, priorities are set to shift around “missing middle” housing like duplexes and townhomes, for example. Additional challenges can surface when the wishes of elected officials don’t line up with those of non-elected government employees. “Sometimes planning department staffs and councils are aligned,” Allen says. “Sometimes they are not.”
With the long run of population and business growth in the Triangle over recent decades, there is a scarcity of available land in the region’s urban core, which has pushed residential development, industry and retail activity out into quiet suburban crossroads like Holly Springs and Wendell, as well as once-rural Johnston and Lee counties. “Johnston County between Clayton and Smithfield has really blown up, and we’re starting to see interest in Franklin County,” Allen says.
‘All boats rise:’ Triangle retail real estate market is shining, report finds
Sound strategic planning has made the difference. Local investments in water and wastewater capacity have driven growth. “It has everything to do with utilities, land-use and zoning,” Allen explains. “Johnston County has done a great job. That’s a model to be emulated.” Conversely, the absence of such investments has limited development in some Triangle “halo” counties.
For years, an absence of utilities and interest on the part of local leaders impeded hopes for development in Orange County. In 2011, voters there approved a sales-tax provision the county could use to create economic development districts along I-40. “There was finally a funding source to put utilities in the ground,” says Steve Brantley, director of economic development in Orange County. At the same time, county leaders pieced together an incentives policy to attract new businesses. “That’s when I began to see a giant change,” recalls Brantley, who had been a seasoned business recruiter at the North Carolina Department of Commerce prior to being hired to lead Orange County’s economic development program.
Remote work, economic uncertainty continue to weigh on Triangle office market
The shift resulted in the arrival of manufacturers like Japan’s Morinaga & Co., which opened a 120,000-sq.-ft. candy plant on 20 acres in Mebane in 2016, the company’s first U.S. facility. As the COVID-19 pandemic put the brakes on business relocations in 2020, developers like Ohio-based Al. Neyer LLC acquired land for speculative industrial development.
Neyer’s work in Orange County resulted in last year’s move by Thermo Fisher Scientific to Buckhorn Industrial Park, where it is creating as many as 200 jobs. In recent years, even famously restrictive Chapel Hill has implemented town policies to bring in commercial development. “Now all these things are helping Orange County diversify its tax base,” Brantley says.
As tech firms tap the brakes, data suggest softening demand for Triangle office property
The region’s abundance of STEM-ready workers has made the Triangle a popular global destination for companies like Thermo Fisher, a trend the pandemic accelerated. “Compared to places like Boston, Raleigh-Durham has a better quality of life and lower land prices,” says Barry Bowling, head of the Land Services Group at CBRE|Raleigh. Major industry players like FujiFilm announced large operations, putting pressure on property values here. “Life sciences interest during COVID began driving up land prices,” Bowling says. “That segment has cooled recently, but that hasn’t reversed pricing.”
Triangle tech worker average pay hits $99.8K, new report says
Bowling has been involved in Triangle commercial real estate for 36 years. “I’ve watched this market evolve, and what’s become painfully clear in the last 10 years is the scarcity of developable land in the metro part of our market,” he says. The nature of the Triangle’s economy meant there wasn’t a lot of industrial zoned land to begin with. “Demand is there, but there’s limited available land close to major metros in Wake, Durham and Orange counties. Projects are going further out by necessity.” But at the same time, improvements in highway infrastructure have made once remote communities like Sanford, Wendell and Zebulon more accessible. “Those places aren’t that far away anymore,” Bowling says.
As Triangle’s life science industry booms, real estate leaders get proactive in filling space needs
Other Triangle communities are counting on large investments in industry-ready sites of all sizes. Person County, for example, is now aggressively marketing two properties.
A 1,350-acre industrial “mega-park” has ample water, sewer, electric and fiber-optic capacity and boasts N.C. Commerce Department certification plus permitting by the U.S. Army Corps of Engineers. Not far away, the 26-acre North Park Site is being readied with help from a grant of nearly $1 million from the Golden LEAF. Research Triangle Regional Partnership CEO Ryan Combs calls the strategy “a barbell approach” that can accommodate major corporate facilities or more modest business operations. “It’s a smart approach that preserves optionality for the county,” Combs says. “With opportunities spanning EV supply-chains, re-shoring of critical manufacturing and legacy industries like furniture production, the timing is ideal for ready-to-go sites like these.”
Getting employees back in the office: Employers wield both carrots, sticks
Similar investments in Franklin, Granville, Vance and Warren counties have positioned abundant rural lands north of the Triangle’s center equally well, Combs says. “It started with the Triangle North partnership years ago,” explains Combs, whose organization provides promotional support to the 14 counties surrounding Research Triangle Park.
A cross-county revenue-sharing agreement pulled the four together in a collaborative marketing venture to draw development. Sites there leverage close proximity to airports, Interstates, community colleges and other economic assets, in addition to their convenience to Raleigh, Durham and RTP. “As far as industry-ready lands go, these counties are all poised to attract development by companies seeking affordability as well as connections to global markets,” Combs says. “This could well be the region’s next frontier.”
Triangle industrial real estate ‘still a landlord’s market’ despite new deliveries
