Downtown Raleigh, once a ghost town, is now a destination

Efforts to breathe life into Raleigh’s city center are paying dividends

dbracken@newsobserver.comAugust 4, 2012 

  • Plotting downtown’s comeback • July 2006: City spends $10 million to reopen Fayetteville Street to vehicular traffic, opening up downtown’s main street after nearly 30 years as a pedestrian mall • September 2008: $221 million Raleigh Convention Center opens • October 2009: $14.8 million City Plaza opens at the south end of Fayetteville Street • June 2010: City opens new $1.2 million downtown amphitheater • August 2011: Red Hat agrees to occupy one of Progress Energy’s two downtown Raleigh office towers • July 2012: Citrix Systems announces plans to locate its new downtown Raleigh headquarters in the old Dillon Supply warehouse   Downtown’s new anchors Red Hat and Citrix Systems are both publicly traded technology companies. Both received millions in state and local incentives to relocate downtown. Red Hat’s Linux software is free. The company makes money by charging customers for maintenance and support and for services such as training and consulting. By spring, Red Hat expects to have completed the transfer of more than 750 employees from its current headquarters on N.C. State University’s Centennial campus to a 19-story office tower at 100 E. Davie Street. Fort Lauderdale, Fla.-based Citrix’s products enable companies to access specific applications as well as entire computer desktops remotely. Citrix’s offices in downtown’s warehouse district will act as the headquarters for its ShareFile data-sharing division. Citrix acquired Raleigh-based ShareFile, which makes software that enables businesses to share large files confidentially over the Internet, in October. Citrix has about 150 employees in Raleigh but expects that number to grow to 250 or more by the time it moves into its new space at 120 S. West Street in the fall of 2013.

— Ten years ago this fall, a group of more than 100 people began gathering in one of the largest extended brainstorming exercises in Raleigh.

The topic was a familiar one: how to bring Raleigh’s moribund downtown back to life and make the streets more “livable.” Few disputed that downtown needed rescuing. It had become a depressing place in many respects, one that employers were fleeing at an alarming rate.

When the advertising agency McKinney announced in 2002 that it would leave downtown, its CEO Brad Brinegar summed up the problem.

“This isn’t a destination place,” Brinegar said at the time. “It’s not the most interesting place in the Triangle in terms of someone driving up to the front door and making a statement.”

A statement is exactly what Citrix Systems made last week when it announced plans to relocate downtown and convert an old Dillon Supply warehouse into a funky high-tech workplace. The deal is the latest, and most emphatic, sign of downtown Raleigh’s resurgence.

While downtown still lacks a critical mass of residents, its streets have indeed become more livable, even lively on some days. The transformation is starkest on weekend nights when young and old descend on downtown, filling its bars and restaurants and spilling onto the sidewalks.

The arrival of Citrix and software firm Red Hat, which together are expected to dump 1,000 highly paid workers into the area over the next 15 months, has given downtown boosters hope that such vibrancy could soon become an everyday experience.

“Due to the momentum they’re providing, I believe the locals are kind of catching on to that,” said G Patel, a restaurateur who will open his third establishment on Fayetteville Street later this year. “Even during the weekdays we’re seeing foot traffic increase downtown. Before, on Sunday, Monday and Tuesdays it would be a ghost town.”

Private investment

Red Hat and Citrix also have helped validate investments the city and county have made in downtown over the past decade, including reopening Fayetteville Street to vehicular traffic and building a new convention center and outdoor amphitheatre.

“Ten years ago the trend was to come back into downtowns, but we hadn’t done what needed to be done to bring people into downtown,” said developer Greg Hatem, who owns a number of office buildings and restaurants in downtown. “Once we put those things in place, then slowly but surely these smaller projects started to happen. And those are the projects that define a downtown.”

Landing both Red Hat and Citrix was certainly a coup, and one that was desperately needed after Progress Energy announced plans to eliminate 700 to 1,000 jobs downtown. The question now is whether a wave of private development will follow since additional large-scale public investment is unlikely.

City and county officials made their investments in downtown before the economic crisis hit. Such investments are hard to justify today, as is evidenced by Raleigh’s decision to shelve a plan to build a new $175 million public safety center downtown.

Developers, meanwhile, have plans to construct a number of new high-rise office towers downtown. But those projects, which require large anchor tenants to get built, have been delayed indefinitely. Raleigh itself ended several deals with developers for projects on city-owned land, including a deal with Hatem to build a hotel near the convention center.

Reuse instead of rebuild

Although both Red Hat and Citrix wanted to locate downtown in part to be in an area where employees could live and work, it’s telling that neither company will pay top-dollar rents.

Red Hat signed a sweetheart sublease with Progress Energy, which is vacating one of its downtown towers after merging with Duke Energy. Citrix is moving to a block that Triangle Transit is selling to the developers for just $3.2 million.

The Citrix deal, in particular, could end up being a model for near-term redevelopment activity downtown, said Gregg Sandreuter, a Cary developer whose ambitious downtown project, Edison, has been delayed by the economic downtown.

“It’s quite possible there are as many adaptive, reuse projects that cost less than there are new, high-rise office buildings,” he said.

When Edison was first proposed in 2007, its plans called for two office towers. The project has been reworked and now includes a 23-story luxury apartment tower that could break ground as early as this fall.

Adapting existing buildings has the advantage of retaining the character of downtown areas such as the warehouse district while providing affordable space for the startups that the city desperately wants to attract. Downtown Durham is well ahead of Raleigh in this effort, with several incubators that provide discount office space to startups.

Hatem believes investment will flow because Raleigh has emerged from the economic downturn better than many other markets.

“Now there’s a lot of people around the country, around the world, wanting to invest money in markets that are growing,” Hatem said. “And now Raleigh’s on the A list instead of the B list.”

Residential development

The best example of this is the city’s apartment market, which investors have been pouring money into in recent years.

There are now eight projects with 1,821 units under construction in central Raleigh, with all but one of them within three miles of downtown, according to MPF Research, which analyzes apartment data in 100 U.S. metro markets. Once completed, those units would expand the inventory of apartments in central Raleigh by 11 percent, which, for a single market, is a staggering amount.

Such an influx of full-time residents could ultimately end up transforming the character of downtown more than Red Hat and Citrix. Many of the amenities that downtown residents now pine for, such as a supermarket, require a level of density that currently does not exist.

That lack of density also explains why, although downtown now has plenty of restaurants and bars, it has struggled to add retail. But even that is slowly starting to change. Hatem, for example, is adding several retail stores in the ground floor of his buildings, businesses that likely would have had little hope of succeeding five years ago.

Few can appreciate the strides downtown has made better than David Fowle, who operated the beloved Cafe Udine in the Sheraton Hotel until it closed in 2002.

“When I started in 1994, you could put money under a brick on Fayetteville Street mall on a Friday and it would be there Monday morning,” he said. “That’s how dead it was down there.”

Fowle never gave up on downtown, and to prove it he returned last year and opened the Wilmoore Cafe on Wilmington Street.

“We’ve been grinding it out for 14 months, and business is growing,” Fowle said. “You come down here on Thursday or Friday or Saturday night and you stand on Fayetteville Street. You look north and there’s the Capitol and you look south and there’s the Progress Energy Center. That’s our postcard.”

Bracken: 919-829-4548

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