Business

Downtown Raleigh rents up 9 percent as more young people move to the area

Residents and workers keep pouring into downtown Raleigh, and with them, waves of construction are following.

Around 8,500 people now live in downtown and 47,000 people work there, leading to some of the highest occupancy rates in more than a decade, said Bill King, senior vice president of economic development and planning for the Downtown Raleigh Alliance (DRA).

DRA said that population could reach nearly 11,000 in the coming years, meaning the need for new apartments and offices is going to continue.

King, pointing to an upward arrow, said, “I can pretty much make this chart for any possible description of how we are doing” in downtown Raleigh.

King was speaking Tuesday at DRA's state of downtown event, an annual meeting that outlines how the city's core business district is performing.

This past year, much like the preceding years, downtown Raleigh once again posted impressive growth, highlighted by the nearing completion of The Dillon, the 17-story office-and-residential tower and Union Station.

That growth is expected to continue into the next two years, with $1.75 billion of investments in the pipeline, including several projects that will change the city's skyline once again.

Here's some takeaways from DRA's state of downtown:

New news

  • FNB Tower will break ground on 501 Fayetteville St. on May 3. The 22-story tower was meant to begin construction this winter — something that caused the removal of the downtown skating rink — but was ultimately delayed.

  • Apex Outfitters, an outdoor clothing and gear store in Apex, is opening its second store in downtown Raleigh. The outfitter will be moving into the soon-to-be former DECO space at 19 W. Hargett St.

Apartment growth

  • More than 1,800 units completed since the start of 2015, leading to a 35 percent increase in the number of people living in downtown.
  • The occupancy rate for multifamily properties in downtown is now 95 percent. That high occupancy rate led to a 9 percent growth in rental prices in 2017. In 2016, rent actually decreased by 3 percent. The average rent downtown in 2018 is $1,444.
  • More of those rental properties are filling up with young people; 36 percent of downtown residents are between the ages of 25 and 44, compared to 28 percent for the rest of the Raleigh metro area.
  • That 9 percent growth underlines the need for more supply, King said. "In 2017, we didn’t deliver a lot of units," he said. "When we delivered a lot of units (in '15 and '16) rent went down. This is why it is important to continue to add supply to the downtown housing market to make sure we don't have rapid rental growth."
  • More than 1,000 apartments are under construction currently; more than half of those are going up in Glenwood South.
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How apartment rents in downtown Raleigh compare to its peers. Courtesy of Downtown Raleigh Association

Offices full

  • Downtown Raleigh is the densest office market in the Triangle. It also has an occupancy rate of 94.7 percent — its highest rate in more than a decade.
  • Half a million square feet of office is under construction or planned for downtown Raleigh.
  • There has been a 106 percent increase in land value in downtown since 2008. For example, the 301 Hillsborough St. property recently sold for more than $9 million an acre — two years ago it sold for $5 million per acre.
  • 442 percent increase in co-working space expected from 2015 to 2019.
  • More than 850 businesses are in downtown now, employing 47,000 people.
OFFICE RENTS.JPG
How office rents in downtown Raleigh compare to its peer cities. Courtesy of Downtown Raleigh Alliance

Retail surge

  • 40 new stores have opened in downtown Raleigh since 2014, and 94 percent of stores are locally owned.
  • 51 restaurants opened in downtown since 2016, with 24 opening in 2017.
  • $224 million in food and beverage sales in 2017, a 10 percent increase from 2016.
  • 46 percent growth in downtown tourism since 2007.

Zachery Eanes: 919-419-6684, @zeanes
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