Cover Story: Downtown Raleigh Reimagined By Building Boom
In 1792, surveyor William Christmas sketched a new city in the woods of Wake County that would become the capital of North Carolina.
He found an elevated spot for a Capitol and, across 400 acres, drew a square city with numbered lots for the businesses and homes.
Those boundaries defined Raleigh for a century and a half. Then the population exploded with the baby boomers, and the families swarmed the suburbs for the glories of central air conditioning and shag carpet.
But now, it’s once again hip to be in the square.
A large number of projects are either underway or scheduled for downtown Raleigh, projects that will stretch the city’s skyline and reimagine its future. It’s a reflection of the city’s perception as a plum place to live and work — and rising interest in an urban lifestyle.
“The more large-scale developments in downtown the better as we have many students graduating locally that want to work downtown,” says Andy Andrews, a Raleigh native and the president and CEO of Dominion Realty Partners. “Working, living and enjoying downtown is a way of life for folks these days.”
Downtown Raleigh’s Future Skyline
Back in 1792, the entire sale of lots brought the government just 6,612.15 Pounds Sterling (the dollar was adopted months before).
Now, billions of dollars are pouring into downtown as developers rush to accommodate workers and companies that hire them. Last year, The Fallon Company, based in Boston, paid $17 million for 1.85 acres along Hillsborough Street. “What we are seeing is an increase in demand for space in downtown Raleigh,” says Bill King, president and CEO of the Downtown Raleigh Alliance. “And I think you are also seeing a reflection of recent developments that performed well.”
The question that lingers across the hallways of local businesses is whether all these office, retail and residential projects will actually find the necessary capital to come to fruition. Any downtick in the ever-expanding economy is likely to make commercial real estate lenders nervous about financing new projects that may only start generating cash some three to five years down the line.
But for now, the supply seems to be reacting to the demand.
According to Triangle Business Journal’s most recent Space publication, Class A office space in downtown Raleigh had a vacancy rate of only 4.9 percent in the first quarter. Rates are rising rapidly, reaching $37 per square foot at PNC Plaza on Fayetteville Street.
More office space is coming, and soon. For example, Dominion’s FNB Tower opens on Fayetteville Street in November. Not long ago, that the opening of a 22-story tower in Raleigh would seem like a signature event — but in this bull market, it seems as common as a new pizza joint.
PNC Plaza, at 33 stories, has been Raleigh’s tallest building since 2008. But there are at least four proposed projects seeking permission to rise to up to 40 floors. Those include:
the third phase of the Peace and West project being built by Kane Realty and Williams Realty and Building Co.;
the Research Triangle Regional Public Transportation Authority (GoTriangle) proposal for a 1.76-acre property on West Street;
a proposal by Zimmer Development of Wilmington to build a 40-story mixed-use tower on Capital Boulevard; and
a group of owners seeking a zoning change for the 200 block of Fayetteville Street.
“Some of that is a reflection of land cost,” King says of the vertical ambitions. “Land cost has gone up in Raleigh. To get more value, you have to go higher.”
Those driving the projects insist their buildings will be designed to add aesthetic value to the city. And while Raleigh won’t have the architectural richness of Chicago, it may well avoid the soulless feel of the downtowns of Charlotte and Atlanta.
“Our goal is not to change downtown Raleigh, but rather to enhance it’s strategic growth,” says Zac Vuncannon, who is overseeing local operations for The Fallon Company.
Some projects are driven by familiar faces. For example, the Smokey Hollow project on Peace Street is a partnership between Kane Realty, led by CEO John Kane, and Williams Realty & Building Co.
And Kane is teaming with North Carolina Football Club Chairman Steve Malik in pitching a $1.9 billion soccer and entertainment complex on the southern edge of downtown. That project depends on public funds from the hotel/motel taxes.
Other projects represent large bets by national firms.
The Acquisition Group of California plans a 1.5 million-square-foot development on the former site of The News & Observer on McDowell Street. The group paid $22 million for the 3.3-acre piece of property in 2017.
William Peace University sold Seaboard Station to PN Hoffman of Washington, D.C., for $34 million last year. A $250 million project is planned.
And The Fallon Company paid $17 million for 1.85 acres along Hillsborough Street and places to build three towers, with the first rising 20 stories and the others, 19. Fallon expects to break ground on the first phase this year, with the 300,000-square-foot building delivering in late 2021.
The circular Holiday Inn across Hillsborough Street — long a downtown landmark — is also 20 stories.
“Downtown Raleigh has seen a transformation during the past 10 years and the success of recent developments signals the demand for more urban, mixed-use development in our city’s core,” The Fallon Company’s Vuncannon says. “It is our belief that the next 10 years will offer the greatest opportunity to add to downtown’s growth, and we are excited to play a part in that continued evolution.”
Like Andrews, Vuncannon says the rising interest in workers being downtown is fueling the growth.
“Companies are making strategic decisions with their real estate as location, design and walkability are all selling points for the modern workforce,” Vuncannon says, pointing to Pendo’s decision to put its headquarters in The Fallon’s new Hillsborough Street tower.
“New projects enable opportunities to put connectivity, wellness, technology and innovation at the forefront of design.”
King notes that a rising number of people want to live downtown as well. He adds that multifamily developments in the area are about 95 percent full, not including the most recent projects.
“We’ve added 2,400 units over the last four years,” he says. “That’s a lot of units to add to downtown, and to have that high of an occupancy rate is pretty significant.”
With the changes in downtown come challenges as well. Affordable housing remains an issue for the city, especially for many of the state and city employees whose jobs require them to be downtown. The split-level homes in North Hills that once housed state and city employees are being flattened for mansions beyond the reach of a government salary, and critical employees such as firefighters, teachers and police face a challenging economic situation in a city becoming increasingly expensive.
Managing the density will be a challenge as well.
“The good news is that we have a Wake transit plan,” King notes. “We’ll have our bus rapid transit lines coming in and out of downtown Raleigh.”
And certainly, economic headwinds can topple even the sturdiest of projects.
But Andrews, who has seen Raleigh evolve, likes the current trajectory. “Our downtown has already changed for the better,” he notes, “and will continue to attract new businesses.”