Insider Opinion: Raleigh Condo Market

Wake County is one of the ten fastest growing counties in the nation, according to CNN Money, but can the recent supply boom of condos in downtown Raleigh be sustained?

Many of the condo projects in Raleigh still have several units left as buyers cannot differentiate the product. Granite counters? Check. Maple cabinetry? Check. Rooftop pool? Check. Let’s face it, people are not jumping at each others throats to live in Downtown Raleigh. But why would anyone chose to live somewhere else? Let’s take a look at several of the contributing factors to this:

Raleigh’s housing market is elastic: there is a seemingly infinite amount of undeveloped land to the north, and especially, to the south and east. Developers have the option to keep building further out, where land is cheaper. This allows the price of housing in our area to remain low, continually attracting people from all over the country to move to Raleigh, not to mention all of the other reasons people want to live here. The result is a lack of price pressure from outside of downtown. (Meaning downtown condos are over-built and too expensive as compared to outer neighborhoods.) Why live in a condo downtown when you can have your own yard, for half the price, and be five minutes outside the beltline? This trend continues out further: get a house twice the size for the same price five minutes outside of I-540, etc.
There is no urban employment center. This doesn’t necessarily have to be a Central Business District, but the major areas where jobs are located need to be in a dense setting. If everyone has to go to the same place to work (with a small geographical footprint), workers are more reluctant to commute and are willing to pay more for less driving time. Raleigh has no urban employment center; in general, most people working downtown are middle-aged lawyers (because they have to be close to the Capitol), Progess Energy employees, boutique office users, bourgeois like accountants and finance managers (who can afford to locate their small business there, also middle aged). The RBC Centura HQ will probably greatly improve the single yuppie population(aka, condo buyers). But we are not there yet.
Downtown Amenities. Where’s the grocery store in downtown Raleigh? That’s right, most downtowners drive to Cameron Village. (Okay, Seaboard Station just opened and then re-opened, but won’t be able to support the entire downtown population: there are over five hundred condo units under development right now, many of which are closer to other grocery stores.) Downtown Charlotte has FAR more amenities than downtown Raleigh, and Charlotte’s projects are not exactly killing it either. At least by next year, downtown Charlotte will have a movie theater, a bowling alley, and a sports entertainment district in addition to the grocery store, centralized night life, three Fortune 500 headquarters, performing arts center, Discovery Zone, and both NBA and NFL teams that currently attract residents.

There is no ONE spot in Raleigh that people want to live. North Raleigh. Downtown. Brier Creek. Five Points. West Raleigh. Inside the Beltline. Outside the Beltline. Raleigh is decentralized. There is no focus. Again, employment, is focused in the suburbs and in RTP; take a snapshot of eastbound I-40 at 5 p.m. to get a visual representation of this. Until downtown becomes THE hip and hot spot, there will be no real condo market in Raleigh. This paints a gray outlook for Raleigh condos under development at present. But what will happen? Someone will have to cut prices—and you can bet that it won’t be the developers. Smart people rarely lose big. The most likely candidates to lose are those eager to buy, especially multiple unit buyers, who don’t see the big picture.

Barden08/25 04:02 PM

I’ve been arguing these points for quite sometime, thanks for putting them down so eloquently!

RaleighRob08/25 07:11 PM

I think the biggest flaw in the downtown Raleigh condo market is that the developers are under this idea that our city is full of wealthy people. Perhaps, but I’ve always thought the people most likely to be interested in living downtown are NOT people making six-figure salaries! Most people I know who are fans of downtown can’t afford 99% of the condos here.
The developers of 712 Tucker got smart and recently announced that instead of a condo building, they would make it an apartment building. Brilliant move on their part, IMO. There is still LOTS of demand for reasonably-priced yet nice apartments in downtown…but not many to choose from.
And as far as condos and townhomes…well of course I like to see those coming in too. But a quarter million for a little two-bedroom unit? No thanks.

chris08/26 10:36 PM

Neither Austin Texas nor Portland Oregon have Fortune 500 companies in their downtowns yet the cities are thriving. even if we throw out Portland because they are ‘landlocked’, Austin is a very similar city to Raleigh. metro area is actually a bit smaller than Raleigh.

charlotte, while it has three fortune 500 companies downtown, two with extremely large egos, the result of a ‘mine is bigger than his’ syndrome that is so pervasive, the downtown has lost no character or charm. a skyline photo looks like ‘AnyCity, USA’ despite their desperate ‘charlotte, USA’ attempts. clearly, the companies have been able to spur development in downtown. again, very sterile, ‘white’ development. this is not what distinguishes a city from other “non-major markets”. what Raleigh has that charlotte does not is 50,000 college students inside the beltline. why do you think Raleigh consistently gets rated as a top city for singles, nightlife, etc? Charlotte usually ranks very poorly. its because we have 50,000 students who can stay out until 3:00AM. obviously they are not all purchasing $400,000 condos…but many of their daddys are.

the point is there are dramatic macroeconomic and micreconomic drivers that are driving the condo development in downtown Raleigh and should continue to drive this growth as the schools get larger, there is a continued national trend to ‘urban living’ and Raleigh’s overall economy stays strong. all one needs to do is drive around Dowtown and just look at the number of contruction projects. these ‘developers’ are not dummies. they don’t always ‘win’ but they don’t pony up $40,000,000 without having done a lot of homework.

Mark08/27 01:47 PM

Your response is timely due to recent forecasts in Austin’s condo market.

Austin condo market: How much is too much? (Aug. 26)

S. Austin condos in limbo (Aug. 24)

Like Charlotte and Portland, Austin is a secondary(or “B”) real estate market. Raleigh is a tertiary market(“C”). Also, Austin has a CBD. And condos priced at over $3M each. The population is double that of Raleigh. A quick look at demographics, geography, and key planning points show that Austin is really not that similar to Raleigh at all. Except that its a capitol city.

And I don’t think anyone is implying that these developers are “dummies.“

Robert E Leebowitz08/27 02:18 PM

Bull City Rising posted a rumor that Capital City Grocery was investigating a Durham location: http://www.bullcityrising.com/2007/08/rumor-capital-c.html

They quote a standard used by retailers of 10,000 residents nearby to justify a grocery store. With the opening of Capital City Grocery in Raleigh, and Cameron Village nearby, I don’t think downtown is under-served. the Glenwood South condos seem equidistant to Harris Teeter and Capital City.

Barden08/27 02:27 PM

The major problem with Capital City grocery and the entire Seaboard area is signage. Only if you are a downtown insider do you even know it’s there.

I’ve heard that the city currently holds some pretty archaic sign laws that prevent many of the stores from having signage on Peace St.

Not sure what the solution is here…

Mark08/27 02:42 PM

Also, Raleigh condo-ites still have to drive to get there (unless you live in the Cotton Mill.)

Smith08/27 03:04 PM

I would argue that Charlotte’s skyline is the exact opposite of “AnyCity, USA”. The Bank of America Corporate Center is a distinct landmark (Cesar Pelli & HKS Architects) which can be seen for miles away and who’s spired crown is easily recognizable to anyone who has been to Queen City. Hearst Tower is also easily recognizable to anyone with its flared design - the top floors of the building extend further out than the base, almost like an ice cream cone, which is how the locals describe the tower.

Also, with a public library located downtown, a Discovery Zone museum for children, the Blumenthal Performing Arts Center, Spirit Square Community Theater, a downtown NBA Arena and NFL Stadium, the US Mint Museum, and the statues of Queen Charlotte at the Square (main intersection of Trade & Tryon), Charlotte offers much more cultural institutions than Raleigh has at this time. As far as ‘sterile, white development’, Wachovia’s new First Street Project is also funding and constructing the African American Cultural Museum - also located downtown. Brooklyn Village (Mass Mutual and Spectrum Properties redevelopment) will provide low-cost new housing options in a downtown that typically has catered to bankers and while spur further redevelopment of the largely-minority Second Ward.

When comparing Raleigh to Portland and Austin, it is important to realize that Raleigh has a population of 367,000 and the Raleigh-Cary MSA has 994,000 residents. Portland and its MSA have populations of 563,000 and 2.0 million, respectively, while Austin and its MSA have populations of 710,000 and 1.5 million.

While Portland does not have a Fortune 500 Corporate HQ downtown, Nike is located in Portland’s suburb of Beaverton and both Nike and Intel are major private-sector employers (and office space users) in the Portland CBD. When compared to Raleigh, Portland has a downtown NBA arena, light rail and a highly protective planning process - both of which encourage dense urban centers, and Portland was founded as a major trade port with access to both the ocean and the Wilmette River - a huge plus for the all inland Oregon micro-breweries that want to ship dank brew all over the US. Raleigh was founded to be the state capitol.

As far as Austin goes, Dell is HQ’d in Round Rock, Austin’s major suburb, and CBD office space is filled by Dell, IBM, Freescale Semiconductors, Apple, Hewlett-Packard, Applied Materials (notice the high-tech trend yet?) in addition to the educational sector and lawyers/lobbyists demand from a capitol city. Finance firms have also been recently locating to Austin to help diversify the economy. Austin’s planning commission is also very powerful, and height restrictions such as not allowing development within view of the state capitol to be higher than the capitol also favors dense urban development.

This is not to say that Raleigh isn’t a great city. Raleigh has the potential to be on the same class as secondary cities such as Portland, Austin, and Charlotte given its high-growth rate, young but affluent population, educated work force, Research Triangle Park, and three of the best research universities in the country. RBC Centura’s corporate HQ and Progress Energy’s (Fortune 500 HQ) downtown presence will greatly improve downtown and allow for better retail choices. Cherokee Partners is quietly growing into one of the largest private-equity funds in the US and will be moving into a downtown HQ soon. A couple of more large corporate moves to the CBD will go along way in Raleigh’s transformation from a sleepy, Southern state capitol into a true regional / US city.

Robert E Leebowitz08/28 03:49 PM

Mark, I haven’t explored the bus routes for Seaboard but I believe you can ride straight from the downtown station to Peace College, within one block of Capital City Grocery. And Cameron Village is well served by routes from Glenwood and Hillsborough St. So, no, most of the condos aren’t within easy walking distance of the groceries, but if residents can overcome the resistance to buses, the stores are convenient. I used to bus from N. Boylan to Cameron Village regularly and there are two routes that get you back to the Boylan/Glenwood South area with very little waiting.

Chad08/28 04:30 PM

The Raleigh bus system is the most inconvenient public transit I’ve ever experienced. I don’t think anyone living downtown would want to ride from the Moore Square station to Seaboard Station unless they had no other option. I think the “resistance” to buses is because they only come twice an hour, are rarely on time and follow a one-directional circuitous route � all making the trip very long. Anyone that can afford to live in a downtown condo most certainly would not choose that option over driving… unless they decide to “go green”. Maybe I’ll go green for Halloween.

Mark08/28 05:19 PM

I doubt condo-ites with cars would take the bus to haul groceries home. Especially if you shop weekly or twice weekly. As Chad stated, the bus system in Raleigh is a nightmare—compared to say, Chicago where you can catch the bus on every almost every other street corner going both directions.

I think the greater point here, exemplified by the fact that we are even having this grocery shopping discussion, is that there are not enough stores (or variety of stores) downtown to support the 500+ condos under construction, let alone fully supply the current residents. No doubt, Seaboard is a positive step forward.

Robert E Leebowitz08/28 05:51 PM

I doubt they will either but they don’t HAVE to use a car, which was my point. If this is even an issue for downtowners (are they complaining that Capital City is too far?), they could request a delivery service from Capital City Grocery.

There was a presentation at the last transit commission hearing about downtown bus routes that are more trolley-like. It’s a good idea and I emailed my reps to let them know.

And my other point is that 500+ condos doesn’t equal the 10,000 people needed for a grocery store (if that BullCityRising.com figure is correct). Let’s see if downtown can keep one grocery store afloat.

Mark08/28 08:35 PM

Try to imagine this discussion from an urban planning perspective: the idea is not to have one location where everyone comes to shop (destination,) but instead to have smaller independent neighborhood-integrated businesses that can serve daily needs. If I can walk two blocks to my warehouse district corner store, for instance, this is much closer to being sustainable, because it makes it not worth it to drive.

RaleighRob08/28 11:47 PM

^Very good point Mark.
And ties back in with my earlier post. If a neighborhood is to be sustainable with living, shopping and working all together….then you need homes for everyone. Not just people making ultra-high incomes. And that’s downtown Raleigh’s current new housing trend’s biggest weak spot.

erin08/29 11:10 AM

marks point is basically the one i was going to make. there are no convienent stores, corner stores, anything downtown. if im walking around and i want just a soda, i gotta go to a restaurant unless that cvs on hargett is open, but its never open during the hours im ever downtown (after 5).

also, you can take the bus to peace college and get off and walk around for probably 30 minutes before you could ever find capital city. its the most difficult place to find and why there isnt a sign on peace st is mindboggling.

also, when i go there, i can buy a tiny bag of sugar for $.60 or a normal size of “organic” sugar for $6.00 i’d rather drive two miles to food lion, HT, or anywhere else and buy the kind of things im used to buying at the prices im used to paying.

Ashton08/29 02:22 PM

There are a few really important things to keep in mind when examining the downtown Raleigh condo market. A few of these points have already been made…but as a general response to many of them:

Developers are not in the business to lose money. With the exception of Hue, all of the developments under construction have been at least 40% sold before construction even started. So the demand is there.

Which comes first, the residents (when there aren’t any boutiques, stores, groceries, etc) or the stores when there aren’t any residents to support them? Its a balancing act that I think the multitude of people with hands in downtown development are doing a great job of.

Yes, condo prices in downtown are expensive. Yes, construction costs are rising everyday, land costs are rising everyday. But that is what is keeping Raleigh residents with appreciating property values and one of the strongest real estate markets in the country right now.

But, it takes those people with the disposable income to sustain these commercial spaces that we so desperately want to see filled. And as downtown matures we will see projects targeted at lower incomes. We already are seeing Hue and 111 Seaboard starting in the mid 100’s. You can live in Bishops Park or Cameron Village for a ‘reasonable’ price as well.

As far as the comparisons to Charlotte, its important to recognize that Raleigh is about 10 years behind the national impulse to revitalize downtowns. It takes time to build a solid, sturdy downtown community. If we wanted to have all of those amenities right now I’m certain we could. And within 2 years we would see a lot of empty buildings.

And, as far as there not being any diversity in the condos downtown - I think the best thing about condos in Raleigh is that there is something for almost every taste. If you want a modern, very urban feel with concrete floors, tall ceilings and white cabinets check out the Hudson. If you like a more traditional hardwood floors, heavy molding type of place, look at the Dawson, or West. If you want a very eclectic mix of old and new, with exposed brick and wood, the Cotton Mill is great. If you want concrete floors, with a mix of hardwoods and carpets you should look at Palladium Plaza. If you prefer the light, airy feeling of oak and chrome, with high ceilings, look at the Paramount. Need a garage and a great location? There’s Martin Place. And the list goes on…

formotion08/30 01:27 PM

I have heard a bit about San Diego’s condo bust but hope we don’t end up like these cities:

Miami Bust

robo09/06 03:53 PM

As a non-condo-buying everyday downtown person, what bothers me about these new condos is not really the yuppy residents that they attract or their effect on traffic or on the economy.

It’s those damn fake balconies! At—what, 2’ deep usually?—they’re big enough for three potted plants or for one person to stand and have a cigarrette. Just as the quiet, tall buildings downtown give you an image of urbanity without actually providing the elements of an urban environment, these balconies blatantly sell the image of comfortable living without actually providing it.

I was on Dawson St at Nash Square one day and actually saw two men standing on one of these ledges talking. They were just a few feet back from the sidewalk and raised a couple feet from the ground, leaning on their code-compliant railing. I just had to laugh at these yuppies in their cage!

Mark09/12 01:32 PM

Follow Up: Raleigh Condo Market

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Smith Friday, August 24, 2007