The Raleigh and overall Triangle retail markets ended 2018 in a strong position with several large sites changing hands, urban growth booming in the downtowns, numerous suburban ground-up projects in the pipeline and traditional malls undergoing major transitions. The market is poised to see retail construction activity grow with a healthy balance of supply and demand, despite national brick-and-mortar retail industry challenges.
The Triangle vacancy rate ended the year with a vacancy rate below 7 percent, which represents strong improvement from the end of 2017, even with accounting for the large-scale closing and downsizings in the Triangle. Positive absorption over the past year has included re-leasing 12 Kroger stores, two Gander Mountains, five hhgregg stores and several other significant box vacancies. Fierce grocery competition and continued pressure on “in-store” sales have caused retailers, owners and developers to rethink and recreate the retail experience and development landscape.
Charlie Coyne Senior Vice President,
CBRE|Raleigh
Downtown urban centers
Rapid multifamily and housing gentrification in the downtowns of Raleigh and Durham continue to push mixed-use and high-street retail. With residential and employment densification occurring, Raleigh has experienced several first-time retail events in 2018. Morgan Street Food Hall and Urban Outfitters opened in the Warehouse District, Publix is under construction on Peace Street and the likes of Harris Teeter and Restoration Hardware are looking for high-street positions in downtown Raleigh.
Major developments include The Dillon delivering near 100 percent committed, One Glenwood by Heritage Properties opening in the spring and Kane Realty Corp./Williams Realty & Building Co. Peace Street and Smokey Hollow projects under construction. The market is closely eyeing the redevelopment of Seaboard Station (recently acquired by PN Hoffman) and Northpond Partners on a reposition of The Creamery on Glenwood South.
Although Raleigh is seeing a mix, downtown Durham should not be overlooked in the conversation of urban retail for the Triangle. A diverse, creative and highly educated population is driving growth in the Bull City with a unique combination of hospitality and entertainment. The hospitality is anchored by the opening of three boutique hotels (21c, Unscripted and Durham Hotel), as well as an elevated culinary environment featuring award-winning chefs and Durham Food Hall opening in the spring.
Duke University has been the prime catalyst for continued large-scale downtown development, but the urban core is starting to see more out-of-market office users ink big leases downtown, notably WeWork at One City Center. In addition to One City Center, downtown Durham has seen other mixed-use projects open recently, such as the Liberty Warehouse, Chesterfield, Unscripted and Mill No. 1.
This year and 2020 will experience other large deliveries. Longfellow will finish its first two office/retail buildings at DurhamID, and Northwood Ravin and Akridge will deliver their project adjacent to American Tobacco named 555 Mangum. Durham is also watching Capital Broadcasting Co. for announcements on the University Ford site adjacent to American Tobacco.
Major mixed-use projects
While urban development is increasingly a focus in the Triangle, new mixed-use development activity in infill submarkets and the suburbs is also very active. In Midtown Raleigh, Regency Centers is under construction on Midtown East, which will bring Wegmans’ first North Carolina store.
Kane Realty continues to expand North Hills with several office, retail and hospitality projects coming. Over in the Crabtree Valley corridor, Crabtree Terrace is also under construction and will be the first significant mixed-use project in the Crabtree Valley area in years. The site will be home to Perry’s Steakhouse, Class A office space and a future flagship hotel.
The booming suburb of Cary is launching four major projects that will contain a significant amount of retail. Columbia Development has received entitlements for its large mixed-use project anchored by Wegmans, while CBL Properties is selling Cary Towne Center, leaving the market expecting redevelopment plans to be announced by the new owner this year.
In West Cary, Leyland Alliance has broken ground on Twin Lakes anchored by another Wegmans. Not to be out-matched by its larger neighbors, Chapel Hill has experienced its biggest development pipeline in decades with Carolina Square completed on Franklin Street, Northwood Ravin’s Carraway Village in North Chapel Hill and Leon Capital Group’s Wegmans project that is slated to open in 2020 along 15-501.
Enclosed mall transformation
National challenges with enclosed malls and traditional department stores are forcing Triangle enclosed mall owners to improve the omnichannel experience and add open-air mixed-use components. In Raleigh, Plaza & Associates and its joint venture partner have acquired the Sears property fronting Glenwood Avenue and are planning a vertical mixed-use project that is expected to include office space, hospitality, entertainment and potentially residential. DRA Advisors is also working to control several of the department store pads at Triangle Town Center.
In Cary at Cary Towne Center, the mall is under contract and the buyer is expected to close in the first quarter, launching a major mixed-use transformation of the long-troubled asset.
Finally, in Durham and Chapel Hill, Northwood Investors has forced a sale of Northgate Mall and is planning a complete teardown and major redevelopment of the Durham mall, while Ram Realty is very near taking ownership of University Place in Chapel Hill.
Job creation, employment
While the Triangle will not be the new home of Amazon nor Apple, the Triangle’s job creation and unemployment rates are still among the top in the nation. The region’s diverse economic engine driven by technology, university systems, healthcare and Raleigh as a state capital, combined with a relatively low cost of living and temperate climate, continue to push population growth and related retail expansion. With five Wegmans projects and at least six large-scale retail focused mixed-use developments in the pipeline, 2019 will likely see a boom of retail construction that is expected to peak in 2020.
— By Charlie Coyne, Senior Vice President, CBRE|Raleigh. This article originally appeared in the January 2019 issue of Southeast Real Estate Business.