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T r i a n g u l a t eA CBRE|RAlEigh CApitAl MARkEts puBliCAtion
FAll 2015
Raleigh implemented a new unified development ordinance (uDo) in september 2013 under the leadership of venerated former planning director Mitch silver. the uDo is essentially a complete overhaul of the prior zoning code governing land use. the primary intent of the ordinance is to promote a walkable, transit-oriented city with high density mixed-use districts with emphasis on sustainability and affordability, or as one planning commission member stated, “build up, not out”. Central to this theme was codifying the 2030 Comprehensive plan, applying form-based development standards, and rezoning nearly 30% of the city (35,000 parcels and 41,000 acres) for greater predictability of process. Raleigh is currently in the final stages of full adoption upon City Council approval of the “city-wide rezoning” which will not conclude until review of public hearing comments are completed in november 2015.
however, the plan is not without complications and objections. generally, neighborhoods are opposed to greater densities and higher height
standards than prior zoning. it appears that in many areas where density should be encouraged, remapping simply transitions to zoning compatible with existing uses. in these instances, future higher density, infill development will inevitably require rezoning which the uDo intended to resolve. neighborhoods will be further empowered to pressure elected officials to disapprove deviations to a newly approved zoning map.
seguing into the recent Raleigh elections, candidates with neighborhood protectionist agendas fared well. A neighborhood activist defeated an eight-term incumbent after gaining recognition for opposing a publix anchored shopping center in north Raleigh, and several incumbents with tough stances on development were re-elected. this does not mean densities in development within Raleigh will not perpetuate, however, the City of Raleigh must not lose sight of the uDo’s primary objective: to plan for a sustainable community in the long-run that encourages densities in development versus an older model of urban sprawl.
Raleigh’s Unified Development Ordinance, Elections, and Impact on Development
Triangulate: Raleigh-Durham Insights
In July, Raleigh was voted the #2 Best City for Business and Careers by Forbes.
the Research triangle park (Rtp) is renowned as one of the nation’s earliest and significant innovation centers. Founded upon an alliance with three of the world’s leading research universities, the Rtp is home to major corporations, mid-market companies, and start-ups focused on pioneering research and development technologies. As the Raleigh-Durham market grows, the Rtp’s 7,000 acre, campus-like expanse finds itself competing with the region’s burgeoning urban clusters such as Downtown Durham and Downtown Raleigh for millennial driven talent pools. urban clusters provide vibrancy, walkability, and social networking benefits that the Rtp is striving to overcome. large corporate relocations have eluded the Rtp recently as Redhat, Citrix, and others have opted for downtown settings. the Rtp continues to host over 200 companies and
a highly-educated workforce numbering over 40,000, but it finds itself at a crossroads.
Recognizing the need for rebranding and repositioning,
the non-profit Research triangle Foundation has embarked on a campaign that embraces the Rtp’s strengths: unparalleled R&D resources, collaboration, and a strong technology network. the Foundation, not fully content with the suburban status quo, is also taking measures to introduce urbanism and residential uses into its mix. the Rtp is rolling out a new
master development plan and has taken an unprecedented step to self-develop a key section of the park in partnership with hines. the vision for the 100-acre park Center, straddling i-40 in
the middle of the Rtp, incorporates a dense 1.2 million sF of office, 1200 multifamily units, and 200,000sF of retail.
trends favoring downtown living will not abate, but finally the Rtp is reinvigorating itself at precisely the right time as Raleigh-Durham
morphs into one uninterrupted metropolitan region. By generating its own cluster, the Rtp can capture thousands of future jobs that have their genesis in any number of its top-quality incubators, including Frontier, the lab@Rtp, First Flight Venture Center, Alexandria innovation, BD Bioventure Center and the hamner institute.
Urban Clustering and the Future of the Research Triangle Park
Bob Geolas, President and CEO of the Research Triangle Foundation of NC, leads the charge in re-imagining the future of The Research Triangle Park. On October 1, 2015, Geolas
announced to a standing-room only crowd at RTP Headquarters, the $50 million in funds to
begin construction had been secured. With the zoning and funds in place, development will officially kick off in January 2016. - rtp.org
ExAMplE oF potEntiAl opEn spACE
A CBRE|Raleigh Capital Markets Publication
Raleigh-Durham has received numerous national accolades and rankings over the years, but the Bureau for labor statistics has made it difficult to quantify the region collectively. Although viewed by most as one region, data is often assessed within two different metros: Raleigh/Cary and Durham/Chapel hill. this often mutes the collective horsepower of the Raleigh-Durham-Chapel hill metropolitan area. Case in point, the kauffman index assesses entrepreneurial activity for regions across the u.s. and does not include Raleigh-Durham within their top 40. independently, neither Raleigh nor Durham is large enough to make the cut although the combined region would rank among the top 37 largest metro regions in the u.s. however, when kauffman measured regions with the highest ratio of tech startups Raleigh/Cary and Durham/Chapel hill ranked 13th and 22nd, respectively.
the Research triangle park is legendary for it and biotech brainpower and entrepreneurialism, so where is the venture capital and stories of successful buyouts and ipos? the fact is the triangle is garnering a lot of venture capital, but it is very relative. According to the national Venture Capital Association, the entire southeast region of the u.s. received only 3.2% of venture capital funding between 2010 through the 2nd quarter of 2015. silicon Valley firms received a staggering 45% of the $192 billion of funds placed over this period. new England and the new York metro combined for another 20%. in other words, there are many other areas of the country, including top tier cities, receiving less venture capital attention.
the silver lining for the triangle is that 553 local deals garnered $2.42 billion of venture capital between 2010 and the 3rd quarter of 2015 according to pitchbook. Biotech and pharmaceutical firms accounted for 38% of the total or $911.41 million helping Raleigh-Durham secure a position among the top 10 u.s. biotech centers. Comparatively, it firms landed $366.5 million of funding since 2010. Rtp-based the Council for Entrepreneurial Development’s innovators Report concurs that equity funding is alive and well in the region: of the 90 equity deals funded in north Carolina in the first half of 2015, 74 were in the triangle region. Additionally, area firms and organizations – led by Duke and unC - were awarded an astounding $4.58 billion of funding from the national institutes of health (nih), primarily for scientific research, bolstering the region’s reputation as biopharma leader.
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Preserving the Triangle’s Tech Image: Where’s the Venture Capital?
Triangulate: Raleigh-Durham Insights
Healthcare65%
Information Technology15%
Business to Business11%
Business to Consumer4%
Materials & Resources3%
Energy2%
Source: PitchBook Data, Inc.Healthcare Information Technology Business to Business Business to Consumer Materials & Resources Energy Financial Services
Source: PitchBook Data, Inc.
Capital invested by primary industry seCtor(raleigh-durham)
(continued from previous page)
Raleigh-Durham has inertia and the resources to continue to drive capital investment and employment, especially in notably strong sectors such as biotech and it. A strong network of angel investors and serial entrepreneurs are filling the gaps of early stage development start-ups that venture capital traditionally passes over. the market is relatively young, and many startups will mature, especially in hotbeds of entrepreneurialism supported by Duke, unC, nC state, nC Biotechnology Center, and others in downtown Durham and Raleigh. As is the case with most technology clusters, success begets success. the question for now is how will the market accommodate affordable space for the successes that are sure to arise?
A CBRE|Raleigh Capital Markets Publication
DukE uniVERsitY MEDiCAl CEntER MEDiCinE pAVilion AnD CAnCER CEntER
The silver lining for the Triangle is that 553 local deals garnered $2.42 billion of venture capital between 2010 and
the 3rd quarter of 2015 according to Pitchbook. Biotech and pharmaceutical firms accounted for 38% of the total
or $911.41 million helping Raleigh-Durham secure a position among the Top 10 U.S. biotech centers.
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The Rise of Urban Living, How Deep is the Upper-End Apartment Market?
skYhousE RAlEigh
As early as ten years ago, Raleigh and Durham’s central business districts were eerily quiet at night. however, a surge in and civic and private investment, a flurry of grass-roots bar and restaurant openings, and renewed interest in urban living and has injected new life into the region’s once moribund downtowns. not since the 1960’s have the triangle’s urban cores enjoyed such activity.
Raleigh and Durham are a tale of two cities. the character of employment in Downtown Raleigh has transformed from government, law and banking
into a haven for techies. Red hat, Citrix, and ipreo have opened offices downtown and employ nearly 2,000, serving as a beacon for other technology companies. Currently, a growing workforce of over 50,000 populates downtown Raleigh. on the other hand, Downtown Durham, once the tobacco capital of the southeast, is enjoying the same infusion of young, tech-driven talent. the conversion of historic mills into mixed use environments such as American tobacco and West Village add to Durham’s uniqueness and sense-of-place. Duke university and Medical Center, Durham’s largest employer, is playing an integral role in downtown’s renaissance with significant investment in many ongoing developments, and the private-employer has steadily shifted over 1,000 employees off campus into Downtown.
suddenly, Raleigh and Durham’s downtowns are among the trendiest places to live in the triangle, and the apartment market has responded. the first midrise, structured parked apartments were constructed in Durham and Raleigh in 2005, respectively. But the mid-rise boom did not occur until the current market cycle starting around 2010. Downtown Raleigh, including Cameron Village and glenwood south, has gained over 2,315 rental units in this time and another 1,058 units are currently under construction. the region’s first high-rise luxury apartments,
skyhouse Raleigh, opened their doors earlier this year to record setting pricing. Durham’s downtown market, including the ninth street district, has added 1,408 units since 2010, and another 597 units are underway.
the combined downtown Raleigh and Durham apartment inventory comprises a mere 5.0% of the region’s 119,740 unit apartment market. While Raleigh and Durham’s downtowns are currently the beneficiary of 26% of all apartments under construction market-wide, new development will only inch the downtown percentage to 6.1% - a relatively small sum compared to other metros. First ring submarkets such as north hills and Crabtree Valley in Raleigh continue to deliver urban-style communities that compete for downtown residents. presently 64% of all apartments in the triangle under construction are non-garden, meaning they have some form of urban construct. ultimately, residents that can afford the upper-end apartment market make a lifestyle choice: downtown or not.
the renewal of the triangle’s downtowns and the rise of urban living are here to stay. the issue developers now face is the lack of prime sites for continued infill development. the question appears to be not how deep is the upper-end apartment market? Rather, how can the market accommodate long-term demand for urban living?
Triangulate: Raleigh-Durham Insights
ben KilgoreExecutive Vice president
Jeff glennExecutive Vice president
Joe grahamsenior Vice president
Cbre|raleigh4208 six Forks Road, suite 1220
Raleigh, nC 27609919.831.8200
Jim mcmillanVice president
roger edwardsFirst Vice president, CBRE, inc.
© 2015 CB Richard Ellis-Raleigh, LLC, a Delaware limited liability company. The opinions contained in this article represent the opinions of the author and not the opinions of CB Richard Ellis-Raleigh, LLC, a Delaware limited liability company. The information contained in this article was obtained by the author from sources believed reliable but have not been verified, so are for informational purposes only. Neither the author nor CB Richard Ellis-
Raleigh, LLC, a Delaware limited liability company. makes any guarantee, warranty or representation about anything contained in this article.
