ECONOMIC DEVELOPMENT REPORT DOWNTOWN RALEIGH Q4-2017

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1 ECONOMIC DEVELOPMENT REPORT DOWNTOWN RALEIGH Q 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 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.

2 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 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.

3 Economic Development Report Downtown Raleigh ECONOMIC DEVELOPMENT REPORT Highlights Downtown s fourth quarter saw new street-level businesses open and more major construction projects begin and continue, along with strong growth in food and beverage sales. Development Pipeline: At least $1.75 billion in projects are under construction, were delivered in 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. Retail & Storefront Market Downtown Raleigh will gain a new grocery store in 2018 with the announcement of local organic grocer Weaver Street Market coming to the Warehouse District and The Dillon. The store will open in late summer 2018 and provide locally-sourced produce for downtown residents and workers. Publix also will be opening a 45,600 sf store on Peace Street in 2019, giving downtown two grocery options by the end of the decade. During the fourth quarter, nine new street-level businesses opened in downtown. Included in that total are new local gift shop, along with new restaurants and two pop-up retailers. An additional three businesses have already opened in early 1st quarter. Retail has had a strong 2017 with 10 new store openings and three pop-ups and more on the way. Overall, 80 storefront businesses have opened since the start of $1.75 Billion Delivered, Under Construction, and Planned $599 Million Under Construction $515 Million Recently Completed $600+ Million Planned 40 Storefront Businesses Opened in 2017 At least 23 more street-level businesses have been announced or confirmed and are expected to open during the next few months including retail, restaurants, and bars. Deco Raleigh announced it will be expanding to a new location on S. Salisbury St. while longtime retailer, Father and Son, will be moving to the Warehouse District. 1

4 Economic Development Report Downtown Raleigh ECONOMIC DEVELOPMENT REPORT Highlights Residential Market Construction continues on another 825 units including The Dillon and several townhome projects throughout downtown. The Fairweather, a 45-unit condo project, was announced for the Warehouse District. Since 2015, 1,804 units have been delivered and more than 900 units are planned for the near future. Multi-family vacancy is now in single-digits with more than 92% of downtown s Class A rental units occupied. Dining & Hospitality Market Food and beverage sales set a new annual record with $223 million, up 10.2% in 2017 vs Warehouse and Fayetteville Street districts have the highest gains in 2017 with over 15% and 11.6% more sales respectively versus In total, there are now more than 200 restaurants, cafes, and bars/clubs/lounges in downtown. Residence Inn by Marriott opened their 175 room hotel this summer, which are the first new hotel rooms in downtown since Additionally, 958 more rooms are planned or under construction, including currently 126 rooms under construction at Origin, located near Glenwood South and the Warehouse District. 92% Class A Multi-family occupancy rate 10.2% growth in food and beverage sales over 2016 $223 million in food and beverage sales in 2017 Office Market Office occupancy has improved this year with a decrease in vacancy from 11.4% at the start of the year to a mere 5.3% at the end of Downtown saw a net absorption of 248,098 square feet in 2017 which was a considerable improvement on the net absorption of 66,854 sf in 2016 and illustrates a strengthening office market. (Source: JLL). Major leases this year included Pendo leasing 43,000 square feet at the Wells Fargo Capitol Center with room for up to 400 employees. The company plans to hire 150 new employees by the end of the year, fresh off raising $45 million in new capital since last year and increasing revenue by 400% (Source: TBJ) 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. 94.7% Office occupancy rate 2

5 Economic Development Report Downtown Raleigh Downtown Dashboard Residential Market and Demographics 8,212 Population estimated in downtown 16,550 Residents within one mile of downtown core 5,546 Downtown Residential Units 1,804 Units delivered since Units under construction 32.8 Median Age for residents within 2-mile radius 46% % of residents with Bachelor s Degree or Higher 1.8 Average household size within 1-mile radius $51,687 Average household income within 1-mile of downtown 3,662 Units delivered, under construction, planned since 2015 Office Market 45,000 Employees estimated in downtown 94.7% Office occupancy rate in 4th Q ,098 Net absorption square footage in ,600 Square feet of coworking space in downtown 77 Employees per acre, densest office market in region Dining & Hospitality Market $223 million in food and beverage sales in Restaurants and bars in downtown 31 New retailers since James Beard Award Nominations since % growth in food and beverage sales over 2016 Tourism & Hotel Market 1,247 Existing rooms in downtown 958 rooms Rooms under construction or announced 71.2% Hotel occupancy in million Visitors to top downtown attractions 36% Increase in visitors since 2007 Real Property Square Footage Within the Downtown MSD 7,259,714 sf Commercial office space 1,422,280 sf Retail space 6,964,275 Government office/ facility space 5,330,977 Other: educational, religious, institutional 25,237,393 sf Total existing space 2,401,463 sf Under construction 30,651,747 Combined existing, under construction and planned Sources: DRA, U.S. Census, Greater Raleigh CVB, STB Travel 3

6 Economic Development Report Downtown Raleigh Storefront and Development Trends HISTORICAL TRENDS Street-Level Business Openings Street-Level Business Closings Year-End Office Occupancy 89.6% 89.9% 89.2% 93.3% 89.9% 89.4% 88.6% 94.7% Public Investment started or underway $2.5 $0 $205 $187 $0 $91 $169 $137 Private Investment started or underway but not completed (millions) $9.6 $106.5 $117.5 $351 $133 $261 $242 $288 Projects Completed Total Investment completed (millions) $7.4 $22.3 $29.8 $156 $115 $260 $174 $75 60 Street-level openings and closings ( ) Number of closings Number of openings Sources: DRA internal tracking, 4

7 Economic Development Report Downtown Raleigh 4th Quarter Storefront Business Activity Business Openings: Name Type 1. The Alli Retail 2. Republic Wireless Retail 3. Raleigh Vintage/Zartqiues Pop-up Retail 4. Polished Nail Salon Personal Service 5. Southern Charred Restaurant 6. Saigon Bar and Grill Restaurant 7. Dogwood Bar and Restaurant Restaurant 8. Lucarne Restaurant 9. Five Lounge and Discotorium Bar/club Business openings in early 1st Q 2018 Name Type 1. A Place at the Table Restaurant 2. Tama Cafe Restaurant 3. The Pizza Times Restaurant Business closings in 4th Q 2017 Name Type 1. Provenance Restaurant 2. Devolve Moto Retail 3. Deco Home Retail 4. Raleigh Slabs Retail See next page for announced businesses coming soon. 5

8 Economic Development Report Downtown Raleigh Announced Storefront Businesses Business Announcements (Coming Soon) 1. Pooleside Pie Restaurant 2. Wahlburgers Restaurant 3. Growler USA Restaurant/Bar 4. Kaiju Bao and Bowl Restaurant 5. Tonbo Noodles Restaurant 6. Heirloom Brewshop Restaurant 7. Hearth Kitchen Restaurant 8. Barcelona Wine Bar Restaurant/Bar 9. NY Bagels Restaurant 10. Weaver Street Market Retail 11. Urban Outfitters Retail 12. Harris Teeter Retail 13. Morgan Street Food Hall Retail/Food Hall 14. Transfer Co. Retail/Food Hall 15. Publix Retail 16. Speakeasy Bar Glenwood Bar 18. Craft Bar Bar 19. Social 113 Bar 20. YMCA Fitness 21. Sass Nails Personal Service 22. Bishops Cuts & Color Personal Service 23. Hotworx Yoga and Fitness Personal Service 6

9 Downtown Raleigh Development and Investment Project Name Investment Project Type Sq. Ft. Res. Units District UNDER CONSTRUCTION Union Station $87,950,000 Infrastructure 42,000 n/a Warehouse The Dillon $150,000,000 Mixed Use 210,000 (office), 40,000 (retail), 541,000 total 260 Warehouse 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 The Ware Included above Residential n/a 15 Moore Square Hargett Place $14,000,000 Townhomes 44, Moore Square 10Arros $1,805,000 Townhomes n/a 10 Moore Square The Saint $7,000,000 Townhomes 66, Glenwood South Boylan Flats Not announced Apartments 44, Glenwood South Capital Boulevard Self Storage Not announced Storage 123,000 n/a Seaboard/Capital West at Lenoir Not announced Townhomes 24, Warehouse 611 West South Not announced Residential 80, Warehouse Self Storage Facility $7,873,000 Storage 123,000 n/a Warehouse Restaurant at 502 W. Lenoir Not announced Restaurant 4,583 n/a Warehouse One Glenwood $86,000,000 Office/mixed use 219,500 (14,500 retail) n/a Glenwood South Origin Hotel Not announced Hotel/parking structure 331, hotel rooms Glenwood South Metropolitan Apartments** $52,000,000 Apartments/Retail 274, Glenwood South Moore Square renovation $12,600,000 Infrastructure 4-acre park n/a Moore Square Smokey Hollow (Peace and West St) $100,000,000 Mixed Use 652, Glenwood South Poyner YMCA $3,000,000 Fitness Center 28,000 n/a Fayetteville St TOTAL UNDER CONSTRUCTION $ 599,818,000 2,401, residential units 7

10 Downtown Raleigh Development and Investment Project Name Investment Project Type Sq. Ft. Units District PLANNED City Centre (301 Hillsborough St.) $160,000,000 Mixed Use FNB Tower $110,000,000 Mixed Use 220,000 (office), 40,382 retail. 1,121,576 total 150,000 (office) 389,702 total hotel rooms Glenwood/ Warehouse 239 Fayetteville St. 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) Hilton Garden Inn/Homewood Suites Not announced Hotel 260,890 Hotel at Wilmington and Lenoir Streets Not announced Hotel Not announced Courtyard Marriott Not announced Hotel 192, Glenwood South 259 hotelrooms 145 hotel rooms 192 hotel rooms Fayetteville St. Fayetteville St. Fayetteville St. HQ Raleigh expansion (new building) Not announced Office 25,000 n/a Warehouse Exploris School Gateway $20,000,000+ Educational institution 355,889 n/a Fayetteville St./ Gateway The Fairweather Not announced Mixed use/residential 103, Warehouse Fourth Ward Not announced Residential 19, 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 Peace Street streetscape project $2,000,000 Infrastructure n/a n/a Glenwood South TOTAL PLANNED 993 residential units 832 hotel rooms 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

11 Downtown Raleigh Development and Investment Project Name Investment Project Type Sq. Ft. Res. Units District COMPLETED Since Start of 2015 GoRaleigh Transit Center renovation $9,900,000 Infrastructure n/a n/a Moore Square Residence Inn by Marriott $20,000,000 Hotel 150, rooms Fayetteville St. The Edison Lofts $55,000,000 Apartments/Retail 290, Moore Square The Ten at South Person $2,400,000 Townhomes 16, Moore Square Bank of America Plaza renovation $11,000,000 Office Renovation n/a Fayetteville St The Lincoln $35,000,000 Apartments 318, 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, Moore Square The L $17,000,000 Apartments 110, 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, Glenwood South Carolina Ale House $7,500,000 Dining & Bar 37,048 n/a Glenwood South Peace Street Townes $5,000,000 Townhomes 20, Capital McClatchy Interactive office renovation/ expansion $3,600,000 Office 30,000 n/a Fayetteville St Taverna Agora $4,200,000 Restaurant 4,900 n/a Capital Elan City Center Apartments $30,000,000 Apartments 241, Capital Link Apartments $30,000,000 Apartments 276, 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, Glenwood South Dr. Pepper Warehouse $3,200,000 Office 14,000 n/a Warehouse Christ Church addition $7,500,000 Albermarle Building renovation $42,000,000 Place of Worship addition State office renovation n/a n/a Capital 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 TOTAL DELIVERED $ 515,820,000 2,788,214 1,804 9

12 Food and Beverage Market Performance 2017 YTD 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 Downtown has experienced 52% growth in food and beverage sales since $250,000,000 Downtown Annual Food & Beverage Sales: $200,000,000 $150,000,000 $100,000,000 $50,000,000 $ 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. 10

13 4th QUARTER FOOD AND BEVERAGE SALES IN DOWNTOWN Food and beverage sales for downtown were up 10% for 4th Quarter 2017 versus 4th Quarter Downtown restaurants and bars are continuing their strong performance over the past six years with 4th Quarter 2017 up 55% over 4th Quarter $60,000, th Quarter Food & Bev Sales in Downtown: $50,000, $40,000, $30,000, $20,000, $10,000, $- 4th Q th Q th Q th Q th Q th Q 2017 Sources: Wake County Tax Assessor 11

14 MONTHLY FOOD AND BEVERAGE SALES IN 2016 AND 2017 In 2017, downtown saw its strongest months for restaurant and bar sales in May, October, August, and June. November 2017 was the only month did not see growth in sales over the same month in $25,000,000 Monthly Food & Beverage Sales: 2016 vs $20,000,000 $15,000,000 $10,000,000 $5,000,000 $ Sources: Wake County Tax Assessor 11

15 FOOD AND BEVERAGE SALES DISTRIBUTION BY DISTRCIT Due to strong sales this year, the Fayetteville Street district is now even with Glenwood South in share of food and beverage sales and that district has seen the second largest growth with sales up 11.6% over last year. The Metropolitan Apartment fire in March may have affected Glenwood South sales, as well. Warehouse District, though, has seen the largest year-over-year gain with 15.4% growth in sales in 2017 and now holds a 9% share of sales, which is an increase from earlier this year. Moore Square increased to 21% of downtown food and beverage sales, while Wake County now provides data on the Capital district which has 3% of downtown s sales. Distribution of Food & Bev Sales in Downtown By District: % 3% 21% 33% 33% Glenwood Fayetteville St Moore Square Warehouse Capital Sources: Wake County Tax Assessor 12

16 FOOD AND BEVERAGE SALES GROWTH BY DISTRCIT All districts in downtown have seen substantial growth in food and beverage sales since 2013 with the Warehouse District seeing the largest percentage gains with over 53% more sales in the past four years. 60% Growth in Food/Bev Sales By District: % 50% 44% 40% 40% 30% 28% 20% 10% 0% Glenwood Fayetteville St Moore Square Warehouse Sources: Wake County Tax Assessor 13