Downtown Raleigh is home to several new buildings and, in a few years, a large new city government building may be among them.
The Raleigh City Council on Tuesday tentatively approved a plan to sell off some downtown properties and consolidate city offices into a new municipal campus on Hargett Street, where City Hall currently stands. The city will soon solicit offers from consulting firms interested in coordinating the sales and designing a potential campus through a “master planning” process.
The move poses significant implications for real estate in downtown Raleigh, where development interests have sent commercial property values up 31 percent over the past eight years.
City Manager Ruffin Hall said Raleigh likely won’t put its land on the market until the master planning process is complete, which could take 18 months. City staff offered a “conservative” estimate that Raleigh could make at least $50.8 million then from selling about a half-dozen of its downtown properties.
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Raleigh owns land around Moore Square, One Exchange Plaza off Fayetteville Street, Charter Square and the Dillon building on West Martin Street, among others.
If Raleigh’s recent property sales are any indication, the city could make far more than city staff estimates, said Moss Withers, a broker with NAI Carolantic Realty in Raleigh. Raleigh last year sold a 1.2-acre property at 301 Hillsborough Street for $6.3 million that city staff had valued at just over $3 million.
“There will be a ton of interest if these sites were some of the property under consideration. There is capital looking at Raleigh from around the world,” Withers said.
City Hall is 33 years old and isn’t big enough to house all of Raleigh’s government offices. Raleigh spends about $500,000 a year to lease additional office space in five other buildings. Meanwhile, a former police station sits vacant next door at the corner of South McDowell and Hargett streets.
Consolidating the city’s 1,100-plus employees into a centralized campus would improve customer service, save money and prepare the city government for future growth, city leaders said.
The block of Hargett between South McDowell and Dawson streets was one of three options the City Council considered for a municipal campus. Raleigh leaders opted to pursue the Hargett space because staff estimates it will cost the least, because they could continue to utilize the City Hall building and because it complies with a 10-year downtown Raleigh vision plan that they adopted last year.
Building a campus on Hargett would cost an estimated $93 million, according to city staff. Building on alternative sites south of downtown or at Moore Square would have cost an estimated $129 million and $133 million, respectively.
“I think it is a strong financial plan for the long term needs of the city, and we need to move forward to the next step,” Mayor Nancy McFarlane said. “Staff has done a lot of financial analysis, and this will meet the needs of the city in the most cost-effective way.”
It could five or six years to build the campus that Raleigh leaders want, according to a staff report. The city needs about 310,000 square feet of office space, which is roughly the size of the Red Hat Building downtown. And there’s no available space downtown that would meet Raleigh’s needs.
The city faced opposition in 2013 when it sought to build a 17-story tower on Hargett Street that would have housed a new police headquarters. The city sought to pay for it with a proposed 8 percent property tax hike.
The city hopes to finance this proposed centralized government campus by selling assets and borrowing money – but not through a bond referendum, Hall said.