SOUTHEAST SNAPSHOT, MAY 2007

Triangle Multifamily Market

The Triangle region of North Carolina is seeing some of the nation’s most impressive population growth. The region consists of core metros Raleigh, Durham and Chapel Hill and is strongly supported by communities like Apex, Cary and Morrisville.

While the pace of expansion is far from breaking news to individual and corporate natives, national investors are just now catching the scroll across their radar screens. Brokerages focused on non-institutional class multifamily properties report that phone lines are lighting up with calls from New York, California and South Florida exchanges. Like individual investors, institutional groups are being lured by impressive growth statistics like 200,000 new residents in the last 6 years, placing the Triangle behind only Phoenix and Las Vegas in that category.

The future looks no different. U.S. Census figures label the region as the fourth fastest growing metro for 5- to 13-year-olds. While that demographic’s investing habits are still relegated to whatever product can afford the most ad time on Saturday mornings, the figure does demonstrate that its members’ young, professional parents are thrilled to pay an average of $737 per month in rent to live here. Thus, the region’s vacancy rate has improved to 8 percent.

Anchored at each corner by North Carolina State, Duke University and the University of North Carolina-Chapel Hill, the Triangle continues to attract companies seeking highly-capable employees. Research Triangle Park (RTP) is the region’s core business park, holding a global menagerie of R&D, technology, biotech and big pharma.

Adjacent residential alternatives have been historically absent in the RTP corridor (driving the decades of sprawl that distended the Triangle), however, it has recently seen improvement. Along with several townhome and single-family projects, Fairfield Residential’s Vista at the Park will offer a 24-hour fitness facility, executive center and two pools to corporate commuters flowing in and out of RTP. It should also help further fortify a residential submarket taking shape around the Park. The 434 units are expected to be online by the end of this year.

Regional bank RBC Centura is underway with a new 32-story, mixed-use downtown Raleigh headquarters, adding fuel to the revitalization fire that’s ignited the once tired urban district. A block away, construction of a 500,000-square-foot, $220 million convention center is moving along nicely.

Jumping into the downtown fire is Crosland with 712 Tucker, a 179-unit apartment and condo infill project. The company’s Residences at the Arboretum is set to bring 207 units to the already hot collective submarket of Cary, Morrisville and Apex, which boasts the highest average rents in the region at $794.

Woodfield Investments is continuing work in this elbow of the Triangle on 393 units at Tryon Village. They are joined by Contravest’s 240-unit Courtney Reserve at Cary Park.

Woodfield is finishing 276 units at Millbrook Green in north Raleigh while planning 233 units at Woodfield Glen in northwest Raleigh.

Even as the bevy of newly deforested clearings provide local four-wheel drive enthusiasts with plenty of play space, northwest Raleigh’s mixed-use Brier Creek continues to blossom. Trammell Crow Residential’s Alexan brand will add 313 units in the Alexan Brier Creek while Altman Companies started work on 350 units at Highland at Brier Creek Village.

Multifamily transactions set a record last year with more than $1.1 billion changing hands and private equity players are eager to romp through the next greenfield opportunity. The extension of outer loop Highway 540 into harder-to-reach sections of the Triangle is creating potential east and northeast of Raleigh, demonstrated by H.H. Hunt’s plan for 300 units at Ashton Village in East Raleigh and High Point-based Blue Ridge Companies’ plan for 288 units on Knightdale Boulevard.

At risk of sounding pedantic, it seems apparent the market has reached, from an operational standpoint, the end of a 5-year downtrend, lending credence to those who cite an impending 5- to 7-year ascension. Vacancy rates should stick in the single-digits and pressure is already building on landlords to push up rents. Sales may rest momentarily, but should pick up again, if not solely because of the region’s well-warranted sense of optimism.

In total, developers in the Triangle are underway with 4,200 apartment units. Evidently not overconfident, they have another 6,500 units in their sights. Clearly, the number of planned units may be cause for some trepidation, but it hardly impairs any one’s vision of a robust future for the Triangle.

— Craig C. Rowe is marketing manager for Deaton Investment Real Estate in Raleigh, North Carolina.


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