Q1-2018 - Downtown Raleigh

ECONOMIC DEVELOPMENT REPORT DOWNTOWN RALEIGH

Q1-2018

The Downtown Raleigh Alliance produced this quarterly report. The Alliance is an award-winning nonprofit organization whose mission is to continue to revitalize Raleigh’s downtown by enhancing its quality of life and contributing to its economic success (For more information, visit www.youRhere.com). The City of Raleigh is a key partner of the DRA in its economic development efforts to revitalize downtown. DRA receives a grant from the city to enhance its tax base by generating new jobs, supporting existing businesses, and attracting new businesses—in particular storefront businesses.

1st QUARTER 2018

Economic Development Report — Downtown Raleigh

TABLE OF CONTENTS ECONOMIC DEVELOPMENT REPORT Highlights..................................................................................... 1 Real Estate & Population Snapshot .......................................... 3 Historic Trends ............................................................................ 4 Fourth Quarter Street-Level Business Activity........................... 5 Development Under Construction and in Planning .................. 7 Development Delivered in 2015-2018 ..................................... 9 Food and Beverage Tax Revenue ............................................10

Cover photo by Flyboy Aerial Photography

Disclaimer – The information contained herein has been obtained from sources deemed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty, or representation about it.

1st QUARTER 2018

Economic Development Report—Downtown Raleigh

ECONOMIC DEVELOPMENT REPORT Highlights

Downtown’s first quarter saw new street-level businesses open and more major construction projects begin and continue, along with strong growth in food and beverage sales.

$1.75 Billion

Development Pipeline: At least $1.75 billion in projects are under construction, were delivered in 2015-2017 or planned/announced for downtown in the near future with several more major projects yet to announce their total investment figures. Current development figures: Public investment is strong with $200 million in public projects either underway, planned or completed including the greenspace renovations now under construction at Moore Square, ongoing work at Union Station and the Capital Boulevard/Peace Street bridges and interchanges, along with the recently completed renovation at GoRaleigh Transit Center. A recently passed bond package will fund conversions of Blount and Person Streets from one-way to two-way and extend S. West St.

Delivered, Under Construction, and Planned

$768 Million Under Construction

$516 Million Recently Completed

$500+ Million

Planned Retail & Storefront Market Several new retailers announced they were coming to downtown Raleigh, including Apex Outfitter, which will bring a store to W. Hargett St. near another new store, a flower shop called Petale. Also, House of Swank moved into the downtown core at a new location on E. Hargett Street with eyecarecenter moving from Fayetteville Street to the neighboring storefront. Fresh off their successful holiday pop-up, Raleigh Vintage opened their Glenwood South studio to regular retail hours. Glenwood South also added a new wine shop, DRINK, while Cold Off the Press re-opened on W. South Street. Longtime downtown retailer, Father and Son, moved to their new location in the Warehouse District. During the first and early second quarters, 12 new street-level businesses opened in downtown. Included in that total are new retailers, along with new restaurants. S. Wilmington Street saw new business in Tonbo Noodles and The Pizza Times, which are adding new street level vitality. Nonprofit pay-what-you-can restaurant A Place at the Table, opened this January on W. Hargett St. while Tama Tea adds a new café option to the southern end of Fayetteville Street. Overall, 90 storefront businesses have opened since the start of 2016.

12 Storefront Businesses Have Opened in 2018

At least 29 more street-level businesses have been announced or confirmed and are expected to open during the next few months including retail, restaurants, and bars.

1

1st QUARTER 2018


ECONOMIC DEVELOPMENT REPORT Highlights Residential Market Construction continues on another 1,264 residential units including The Dillon and 95% several townhome projects throughout downtown. The Fairweather, a 45-unit condo project, was announced for the Warehouse District. Since 2015, 1,803 units have Class A Multi-family occupancy rate been delivered and more than 400 units are planned for the near future. Multi-family vacancy is now in single-digits with more than 95% of downtown’s Class A rental units occupied, according to Integra Realty Resources. Dining & Hospitality Market Food and beverage sales continue to climb with 1st quarter 2018 up 12.4% over the 12.4% growth in same quarter last year. Moore Square was the biggest standout with 36.8% growth in food and beverage sales over 2017 YTD sales over this time last year. In total, there are now more than 200 restaurants, cafes, and bars/clubs/lounges in downtown. Currently, 1,022 more rooms are planned or under construction, including currently $223 million 134 rooms under construction at Origin, located near Glenwood South and Ware- in food and beverage house District, and eight rooms in the bouqiue Guest House, near Moore Square sales in 2017 Office Market Office occupancy is near a historic high with a decrease in vacancy from 11.4% at the start of 2017 to a mere 5.1% at the end of 1st quarter 2018. Downtown saw a net absorption of 21,657 square feet in 1st quarter 2018 and more than 240,000 sf net absorption in 2017, which was a considerable improvement on the net absorption of 66,854 sf in 2016 and illustrates a strengthening office market in downtown. Office occupancy rate (Source: JLL).

94.9%

Expansions in downtown include Rapid Scale, which will add employees in One City Plaza. Executive Digital LLC announced a new office in downtown, while Ipreo announced that they will hire an additional 250 employees in Raleigh. The Dillon, a 17-story tower opening in 2018, will host FMI Corporation, Stewart Engineering, and Spaces, which is a co-working concept from Regus . Sepi Engineering will be a tenant at One Glenwood, a new office tower under construction in Glenwood South. WeWork, the national co-working space, will occupy 81,032 square feet in the tower as well. Spaces, another co-working space model from Regus, will be a tenant at The Dillon. a 17-story office tower under construction in the Warehouse District. Other forthcoming buildings include 400H and FNB Tower. HQ Raleigh expanded its footprint with the addition of more space to incubate companies in downtown at the Capital Club Building, as well as in Glenwood South.

2

1st QUARTER 2018


Downtown Dashboard Residential Market and Demographics

8,500

16,978

5,478

1,803

1,264

Population estimated in downtown

Residents within one mile of downtown core

Downtown Residential Units

Units delivered since 2015

Units under construction

32.8

47%

1.8

$51,687

Median Age for residents within 2-mile radius

% of residents with Bachelor’s Degree or Higher

Average household size within 1-mile radius

Average household income within 1-mile of downtown

Units delivered, under construction, planned since 2015

Office Market

47,000 Employees estimated in downtown

94.9%

21,657

121,600

Office occupancy rate in 1st Q 2018 (JLL)

Net absorption square footage in 2018

Square feet of coworking space in downtown

3,471

77 Employees per acre, densest office market in region

Dining & Hospitality Market

$223 million

204

31

13

in food and beverage sales in 2017

Restaurants and bars in downtown

New retailers since 2014

James Beard Award Nominations since 2010

10.2% growth in food and beverage sales over 2016

Tourism & Hotel Market

1,247 Existing rooms in downtown

134 rooms

71.3%

3.4 million

46%

Rooms under construction

Hotel occupancy in 2017

Visitors to top downtown attractions

Increase in visitors since 2007

Real Property Square Footage Within the Downtown MSD

7,259,714 sf

1,422,280 sf

6,964,275

5,330,977

Commercial office space

Retail space

Government office/ facility space

Other: educational, religious, institutional

25,237,393 sf

2,702,865 sf

30,651,747

Total existing space

Under construction

Combined existing, under construction and planned

Sources: DRA, U.S. Census, Greater Raleigh CVB, STB Travel

3

1st QUARTER 2018


Storefront and Development Trends HISTORICAL TRENDS Street-Level Business Openings Street-Level Business Closings Year-End Office Occupancy

2011

2012

2013

2014

2015

2016

2017

2018

41 26

38 17

31 15

36 16

29 15

46 30

40 23

12 5

89.9%

Public Investment started or underway Private Investment started or underway but not completed (millions) Projects Completed Total Investment completed (millions)

$0

89.2% 93.3% 89.9% $205

$187

$106.5 $117.5 $351

89.4%

88.6% 94.7% 94.9%

$0

$91

$169

$137

$137

$133

$261

$242

$288

$288

5

5

8

5

15

10

3

1

$22.3

$29.8

$156

$115

$260

$174

$75

$1

Street-level openings and closings (2007-2017) 60 50 40 30 20

10 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Number of closings

Number of openings

Sources: DRA internal tracking, 4

1st QUARTER 2018


1st Quarter Storefront Business Activity Business Openings: Name

Type

1. A Place at the Table 2. Tama Tea 3. The Pizza Times

Restaurant Restaurant Restaurant

4. Growler USA

Restaurant

5. Tonbo Ramen

Restaurant

6. NY Bagels

Restaurant

7. The Night Rider

Bar

Business openings in early 2nd Q 2018 Name

Type

1. House of Swank (new location)

Retail

2. Raleigh Vintage (now open for walk in customers)

Retail

3. Cold Off the Press 4. DRINK 5. Wahlburgers

Retail/juice bar Wine shop and bar Restaurant

Business closings in 1st Q and early 2nd Q 2018 Name

Type

1. Subway (City Market

Restaurant

2. Calavera Empanadas and Tequila

Restaurant

3. Moon and Lola

Retail

4. Tasty 8’s 5. Standard Foods

Restaurant Restaurant

See next page for announced businesses coming soon.

5

1st QUARTER 2018


Announced Storefront Businesses Business Announcements (Coming Soon) 1. Pooleside Pie

Restaurant

2. O-Ku Sushi

Restaurant/Bar

3. Kaiju Bao and Bowl

Restaurant

4. Oak Steakhouse

Restaurant

5. Heirloom Brewshop

Restaurant

6. Hearth Kitchen

Restaurant

7. Barcelona Wine Bar

Restaurant/Bar

8. Seoul 116

Restaurant

9. Tin Roof Restaurant and Bar

Live music venue

10. Calavera Empanada and Tequila (re-opening in new

Restaurant

11. Weaver Street Market

Retail

12. Urban Outfitters

Retail

13. Apex Outfitter

Retail

14. Petale

Retail

15. Morgan Street Food Hall

Retail/Food Hall

16. Transfer Co.

Retail/Food Hall

17. Publix

Retail

18. Speakeasy

Bar

19. 616 Glenwood

Bar

20. Craft Bar

Bar

21. Social 113

Bar

22. Davie Street Pub

Bar

23. Tapworks

Bar

24. Junction West

Event venue/bar

25. YMCA

Fitness

26. Sass Nails

Personal Service

27. Bishops Cuts & Color

Personal Service

28. Hotworx Yoga and Fitness

Personal Service Personal Service/ Retail

29. Eyecarecenter (moving to new location)

6

1st QUARTER 2018

Downtown Raleigh Development and Investment Project Name

Investment

Project Type

Sq. Ft.

Res. Units

District

$87,950,000

Infrastructure

42,000

n/a

Warehouse

260

Warehouse

UNDER CONSTRUCTION Union Station The Dillon

$150,000,000

Mixed Use

210,000 (office), 40,000 (retail), 541,000 total

Capital Blvd bridges/interchanges

$36,900,000

Infrastructure

n/a

n/a

Capital

Morgan Street Food Hall

$2,200,000

Food Hall/Retail

22,000

n/a

Warehouse

Transfer Co. (Stone’s Warehouse)

$19,000,000

Retail

42,000 (retail)

n/a

Moore Square

Included above

Residential

n/a

15

Moore Square

Hargett Place

$14,000,000

Townhomes

44,256

17

Moore Square

10Arros

$1,805,000

Townhomes

n/a

10

Moore Square

The Saint

$23,000,000

Townhomes

66,000

17

Glenwood South

Revisn

Not announced

Apartments/Extended Stay

44,250

48

Glenwood South

Capital Boulevard Self Storage

Not announced

Storage

123,000

n/a

Seaboard/Capital

West at Lenoir

Not announced

Townhomes

24,066

12

Warehouse

FNB Tower

$118,000,000

Mixed Use

157,000 (office) 389,702 total

239

Fayetteville St.

$7,873,000

Storage

123,000

n/a

Warehouse

Not announced

Restaurant

4,583

n/a

Warehouse

$86,000,000

Office/mixed use

219,500 (14,500 retail)

n/a

Glenwood South

Not announced

Hotel/parking structure

331,008

126 hotel rooms

Glenwood South

Metropolitan Apartments

$52,000,000

Apartments/Retail

274,959

241

Glenwood South

Moore Square renovation

$12,600,000

Infrastructure

4-acre park

n/a

Moore Square

$150,000,000

Mixed Use

652,500

417

Glenwood South

Poyner YMCA

$3,000,000

Fitness Center

28,000

n/a

Fayetteville St

Junction West

$4,200,000

Office/event space

12,000

n/a

Warehouse

2,,702,865

1,264 units

The Ware

Self Storage Facility Restaurant at 502 W. Lenoir One Glenwood

Origin Hotel

Peace

TOTAL UNDER CONSTRUCTION

$ 768,528,000

7

1st QUARTER 2018

Downtown Raleigh Development and Investment Project Name

Investment

Project Type

Sq. Ft.

Units

District

107 W. Hargett Street

Not announced

Office/Retail

25,000

n/a

Fayetteville

The Edison (Office)

Not announced

Office/retail

303,000

n/a

Moore Square

400H

Not announced

Office/retail/ residential

144,000 (office), 16,000 (retail)

216

Glenwood South

Hilton Garden Inn/Homewood Suites

Not announced

Hotel

Hotel at Wilmington and Lenoir Streets

Not announced

Hotel

Courtyard Marriott

Not announced

Hotel

Fourth Ward

Not announced

Residential

n/a

10

Warehouse

$65,000,000

Educational institution

355,889

n/a

Fayetteville St./ Gateway

The Fairweather

Not announced

Mixed use/residential

103,250

45

Warehouse

Holiday Inn Express

Not announced

Hotel

n/a

107 rooms

Capital

Fourth Ward

Not announced

Residential

19,302

10

Warehouse

611 West South

Not announced

Residential

80,300

88

Warehouse

Boutique hotel at 615 W. Peace St.

Not announced

Hotel

Not announced

60

Glenwood South

Boylan Pearce Bldg.

Not announced

Mixed Use

31,820

n/a

Fayetteville Street

North Carolina FC Stadium

Not announced

Stadium, office, residential, retail

n/a

n/a

Capital

St. Mary’s Subdivision

Not announced

Residential

n/a

6

Glenwood South

The Willard

Not announced

Hotel/residential

n/a

25 units/125 rooms

Glenwood South

$2,000,000

Infrastructure

n/a

n/a

Glenwood South

Not announced

Infrastructure

n/a

n/a

Capital/Moore Square

402 residential units

888 hotel rooms

PLANNED

Exploris School Gateway

Peace Street streetscape project Blount/Person St. conversion

TOTAL PLANNED

259 hotelrooms 145 hotel Not announced rooms 192 hotel 192,964 rooms 260,890

Fayetteville St. Fayetteville St. Fayetteville St.

Note: these projects are subject to change and should be considered estimates based on public information. Additionally, several projects have not finalized their investment total. As such, planned investment dollars are likely higher and project costs likely to change.

8

1st QUARTER 2018

Downtown Raleigh Development and Investment Investment

Project Type

Sq. Ft.

Res. Units

District

GoRaleigh Transit Center renovation

$9,900,000

Infrastructure

n/a

n/a

Moore Square

Residence Inn by Marriott

$20,000,000

Hotel

150,000

175 rooms

Fayetteville St.

The Edison Lofts

$55,000,000

Apartments/Retail

290,000

223

Moore Square

$2,400,000

Townhomes

16,824

10

Moore Square

Bank of America Plaza renovation

$11,000,000

Office

Renovation

n/a

Fayetteville St

The Lincoln

$35,000,000

Apartments

318,000

224

Fayetteville Street

107 Fayetteville St.

$1,220,000

Office

13,000

n/a

Fayetteville Street

Holy Trinity Anglican Church

$11,000,000

Place of Worship

25,000

n/a

Capital

Raleigh Beer Garden

$2,000,000

Bar

8,670

n/a

Glenwood South

Charter Square

$63,000,000

Office

243,379

n/a

Fayetteville St

SkyHouse Raleigh

$60,000,000

Apartments

358,986

320

Moore Square

The L

$17,000,000

Apartments

110,000

83

Fayetteville St

200 S. Salisbury (Death and Taxes)

$3,000,000

Restaurant

10,903

n/a

Fayetteville St

Devon Four25

$35,000,000

Mixed Use/residential

227,400

261

Glenwood South

Carolina Ale House

$7,500,000

Dining & Bar

37,048

n/a

Glenwood South

Peace Street Townes

$5,000,000

Townhomes

20,000

17

Capital

$3,600,000

Office

30,000

n/a

Fayetteville St

$4,200,000

Restaurant

4,900

n/a

Capital

Elan City Center Apartments

$30,000,000

Apartments

241,293

213

Capital

Link Apartments

$30,000,000

Apartments

276,119

203

Glenwood South

Exchange and Market Plazas renovation

$2,000,000

Civic Space

n/a

n/a

Fayetteville St.

227 Fayetteville St.

$9,000,000

Office

101,439

n/a

Fayetteville Street

Blount St. Commons

$8,000,000

Townhomes

Not available

46

Capital

The Gramercy

$30,000,000

Apartments/Retail

168,398

203

Glenwood South

Dr. Pepper Warehouse

$3,200,000

Office

14,000

n/a

Warehouse

Christ Church addition

$7,500,000

n/a

n/a

Capital

Albermarle Building renovation

$42,000,000

192,370

n/a

Capital

Google Fiber office

$3,000,000

Office

9,926

n/a

Glenwood

N. West St. Development

$5,300,000

Renovations

24,000 total

n/a

Glenwood

2,788,214

1,803

Project Name COMPLETED Since Start of 2015

The Ten at South Person

McClatchy Interactive office renovation/ expansion Taverna Agora

TOTAL DELIVERED

$ 515,820,000

Place of Worship addition State office renovation

9

1st QUARTER 2018

1st QUARTER FOOD AND BEVERAGE SALES IN DOWNTOWN

Food and beverage sales for downtown were up 12.3% for 1st Quarter 2018 versus 1st Quarter 2017. Downtown restaurants and bars are continuing their strong performance over the past six years with 1st Quarter 2018 up 57% over 1st Quarter 2018.

Food & Beverage Sales 1st Quarter 2012-2018 70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 1st Q 2012

1st Q 2013

1st Q 2014

1st Q 2015

1st Q 2016

1st Q 2017

1st Q 2018

Sources: Wake County Tax Assessor 10

1st QUARTER 2018

MONTHLY FOOD AND BEVERAGE SALES IN 2016 AND 2017

Downtown monthly food and beverage sales outpaced last year’s sales with January being the highest grossing month so far in 2018. Sales in January topped $20 million for the first time ever and are up 67% versus January 2012.

Monthly Food & Bev Sales 1st Quarter 2018 vs. 2017 $25,000,000

$20,000,000

$15,000,000

$10,000,000

$5,000,000

$January

February

2017

March

2018


1st QUARTER 2018

FOOD AND BEVERAGE SALES GROWTH BY DISTRCIT

All districts in downtown have seen growth in food and beverage sales in 1st quarter 2018 versus 1st quarter 2017 with Moore Square seeing the most dramatic growth with a 36.8% gain over 2017’s first quarter. This possibly is attributed to new restaurants and bars such as Brewery Bhavana, St. Roch Fine Oysters + Bar, Watts and Ward, Tonbo Ramen, Growler USA, and several other businesses opening over the past year.

Growth in Food/Beverage Sales By District: 1st Q 2017 vs. 1st Q 2018 40.0%

36.8%

35.0% 30.0% 25.0% 20.0%

15.0%

12.6%

10.0% 5.0%

4.5%

2.9%

2.5%

0.0% Glenwood

Fayetteville St

Moore Square

Warehouse

Capital


1st QUARTER 2018

FOOD AND BEVERAGE SALES DISTRIBUTION BY DISTRCIT

First quarter saw Moore Square increase its share of downtown’s food and beverage sales rise from 21% for all of 2017 to now 24.7% . A year ago, Moore Square only accounted for 20% of downtown’s sales in 1st quarter 2017. This increase can be attributed to several new businesses opening in the district over the past year including Brewery Bhavana, St. Roch Fine Oyster + Bar, Watts and Ward, Tonbo Ramen, Growler USA, and several other businesses. Glenwood South remains the district with the largest share of downtown sales, narrowly edging Fayetteville Street district. Both districts saw positive gains in sales this quarter.

Distribution of Downtown Food & Bev Sales By District 3.1%

8.4% 31.7%

24.4%

30.9%

Glenwood

Fayetteville St

Moore Square

Warehouse

Capital


1st QUARTER 2018

Food and Beverage Market Performance 2017 FOOD AND BEVERAGE SALES IN DOWNTOWN

Downtown set a new record for food and beverage sales with $223 million in sales in 2017, which eclipsed the 2016 record of $202 million. Sales at food and beverage establishments in downtown Raleigh were up 10.2% for 2017 vs. 2016. Downtown has experienced 52% growth in food and beverage sales since 2012.

Downtown Annual Food & Beverage Sales: 2012-2017 $250,000,000

$200,000,000

$150,000,000

$100,000,000

$50,000,000

$2012

2013

2014

2015

2016

2017

Sources: Wake County Tax Assessor: Wake County collects a 1% tax on all food and beverage sales in the county, which provides an estimate of overall food and beverage sales. 14