Downtown Raleigh sees wave of ground-floor retail space

Kelly Wohlgenant, owner of Retro Modern Furnishings on the ground floor of Hue Urban Apartments, prepares her downtown store for a grand opening party Friday, April 29, 2016 in Raleigh.
Kelly Wohlgenant, owner of Retro Modern Furnishings on the ground floor of Hue Urban Apartments, prepares her downtown store for a grand opening party Friday, April 29, 2016 in Raleigh.

When Larry Larson was looking for space to open a store for his coffee roasting company, Larry’s Beans, he knew exactly where to begin his search.

“I definitely wanted to be downtown,” Larson said.

His coffee shop, 42 & Lawrence, will open on the ground floor of SkyHouse on Blount Street in late May. Larson said he picked the space because of the area’s energetic and entrepreneurial vibe.

Downtown Raleigh has seen a boom of mixed-use development that features retail space on the main level and offices, apartments or condominiums above.

Developers say such projects – as opposed to one-use office towers or apartment buildings – attract residents who want to walk to stores and restaurants as well as businesses that want easy access to potential customers who live an elevator ride away.

Some early mixed-use projects downtown, including in the Glenwood South and Hillsborough Street corridors, struggled during the economic downturn. But developers say businesses are more eager now to locate in residential-retail buildings such as SkyHouse and the Stanhope Center, a student housing project on Hillsborough that caters to N.C. State University students.

About 150,000 square feet of ground-floor retail space is expected to open downtown in the next two to three years, said Bill King, planning and development manager for the Downtown Raleigh Alliance.

In the past, mixed-use buildings have mostly attracted restaurants and bars, said Jack Kimball, owner of Kimball & Company, a real estate firm that specializes in commercial spaces. Some locally owned clothing and home-goods stores have popped up, but national retailers haven’t arrived – at least not yet.

As more people move downtown, big-name retailers will likely follow, said John Kane, CEO of Kane Realty, which developed North Hills, a popular mixed-use center on Six Forks Road.

Kimball, who has served as a retail leasing agent for PNC Plaza, SkyHouse and the new Edison Lofts on Davie Street, said he fielded a call from representatives of Urban Outfitters, a Philadelphia-based retailer that mostly caters to young adults.

They discussed a possible space on the main level of Edison Lofts, but it wasn’t large enough, Kimball said.

As more people move downtown, big-name retailers will likely follow, said John Kane, CEO of Kane Realty, which developed North Hills, a popular mixed-use center on Six Forks Road.

“It’s just a matter of numbers, quite frankly,” Kane said. “You have got to have enough people down there.”

Since 2010, the number of housing units in downtown Raleigh has grown from about 2,800 to nearly 4,000. An additional 1,500 units are planned or under construction.

“Fifteen years ago, even 10 years ago, downtown Durham was not a place you would want to be, and downtown Raleigh was not particularly inspiring, and North Hills was a run-down mall,” Kane said.

Kane plans to make his mark in downtown Raleigh with The Dillon, a 2.5-acre mixed-use complex planned for West Martin Street in the warehouse district. The 400,000-square-foot project will include commercial and residential towers, as well as 40,000 square feet of ground-floor retail.

“Active street fronts, we think, are very, very important,” Kane said.

Kane also developed the Stanhope Center, which has a CVS Pharmacy. Pieology Pizzeria opened in the building in April.

Glenwood South Pharmacy + Market is expected to open in late July on the ground floor of the new Gramercy apartment building in Glenwood South. The shop will feature a coffee bar and sell prepared foods, groceries and alcohol.

Kane said he expects the Dillon project will attract what remains most popular downtown.

“We’re not talking to a grocery store or a drug store,” he said. “It will be mainly restaurants, quite frankly.”

‘Retail follows the buzz’

Mixed-use development is cropping up in growing cities across the country, said Midge McCauley, principal at Downtown Works, a consulting firm that focuses on retail in downtown cores. The company has offices in Philadelphia and Seattle.

Young people want to live and work in downtown areas, avoiding traffic hassles of suburban office parks, McCauley said. And baby boomers also want to live downtown, “probably because they want their children to come visit them.”

As cities adjust to meet downtown demands, McCauley said, it’s important to identify certain areas that are ideal for retail space. It shouldn’t be on every corner.

Raleigh isn’t the only city that has had more success with restaurants than retail stores downtown, McCauley said. But that doesn’t mean big-name retailers won’t ever find their way here.

“Restaurants create the buzz,” she said. “Retailers follow the buzz.”

Downtown should have a mix of restaurants and unique retail stores, McCauley said. “Who’s going to come downtown for Old Navy if they have it in the malls near their house?”

Some cities have attracted stores such as Anthropologie and H&M to downtown spaces, McCauley said.

Locally owned businesses

Kelly Wohlgenant recently opened her business, Retro Modern Furnishings, in a first-floor suite at the Hue on Hargett Street.

She used to sell her midcentury furniture from a showroom in the back of a music store on St. Mary’s Street, but she wanted to move closer to the downtown core to become more visible to apartment dwellers.

She stays busy on weekends.

“I pretty much get a steady flow of foot traffic the whole time I’m open,” Wohlgenant said.

Hue was built in 2009 but was hit hard by the economic downturn. The developer had planned to sell the residential units as condominiums but switched them to rentals after failing to sell a single unit.

Wohlgenant said she likely wouldn’t have considered a downtown space a decade ago.

She received a $3,000 grant from the Downtown Raleigh Alliance to help her move her business. The group provides small grants and other assistance to businesses interested in locating downtown, said King, planning and development manager at the alliance.

“Our recruitment is not just national retailers,” he said. “We think downtown’s niche is in local retailers, so we really need a mix of both.”

Office, residential, retail

One million square feet of new office space is planned, delivered or under construction, King said, adding to the roughly 7 million square feet of existing office space downtown.

More offices could mean more employees who want to live downtown and walk to work. And those new downtown dwellers would likely eat, drink and shop at restaurants and stores that open on the main level of towers.

Currently, the ground-floor vacancy rate for leasable space is about 5 percent, King said.

As new developments such as The Gramercy in Glenwood South open their doors, King said, retail space likely won’t be empty for long.

“We have a lot of pent-up demand for street-level space,” he said.

Staff writer Sarah Nagem contributed to this report.

Chris Cioffi: 919-829-4802, @ReporterCioffi

More mixed-use development

Cities and towns across the Triangle are seeing plenty of mixed-use development that incorporates retail, office and residences.

▪ Construction began in February on the $70 million Center City, a 27-story building at Corcoran and Parrish streets in downtown Durham. The project, which is expected to open in May 2018, will have ground-floor retail and 155,000 square feet of office space. There will be 21 floors of residences and two levels of underground parking.

▪ Obey Creek could bring 10 buildings, some eight stories tall, east of U.S. 15-501 in Chapel Hill. The development will feature retail space and for-sale townhomes and for-rent apartments, some of which will be slated as affordable housing. The development will be built over the next two decades.

▪ Northwoods Associates want to build a 55,000- to 75,000-square-foot retail, office and residential building on the southeast corner of West Chatham Street and Harrison Avenue in downtown Cary. The $51 million project would be a joint effort between Northwoods and the town of Cary. It would include 188 apartment units.

▪ Kenney Development wants to build a $50 million upscale mixed-use development on 50 acres at the intersection of N.C. 55 and Old Powell Road in Fuquay-Varina. Tentatively called Powell Square, the project will have about 265 luxury apartments and 75,000 to 100,000 square feet of retail and office space.

▪ A 7,700-square-foot development is planned for Main Street in downtown Clayton. The first floor would be home to an insurance agency and possibly other businesses, and two-story apartments would fill the second and third floors.