5 minute read
Interview: George York, President CEO, York Properties
Hotspots
Downtowns in Raleigh and Durham have emerged as exciting live, work, play areas
Advertisement
What are the most important infrastructure projects in the region? The mass transit opportunity is top of mind to me. We have the bus rapid transit system coming online soon, which does not sound all that appealing to me but it’s a good interim step for moving people around the community. The light rail/commuter option is still years away but it will be a significant opportunity to assist our ability to grow in this region. At some point, having that type of transportation option to get us around the Triangle will be critical. It needs to go where people want to go but it can’t stop at everybody’s house, so the details still need to be drawn out to help maximize usage and efficiency.
Which areas of Raleigh-Durham are the fastestgrowing?
George York
President & CEO – York Properties
Downtown Raleigh was not a very exciting area 10-15 years ago. It has been wonderful to see the resurgence of Downtown Raleigh with the 24-hour city vibe, the live, work, play environment, the great restaurants and entertainment options. The same can be said for the Downtown Durham area. It has really been transformed over the same period of time as Downtown Raleigh. Downtown Durham has the benefit of being adjacent to Research Triangle Park, too. The boundaries of Downtown Durham and the Research Triangle Park are actually really close, so they have an opportunity to serve as the town center for much of RTP. Then there is the whole North Hills area. It’s fantastic what has been done with that neighborhood. It has cemented its very own, wonderful live, work, play environment, including lots of great office product and new apartments to complement the retail shopping. Residential communities around North Hills have benefited from all the wonderful things that have been done there. It has been great to see it transition from a sleepy, old mall to what it is today.
What is your near-term outlook for your properties? We believe 2021 will continue to be a tough year for our properties as we continue to navigate the COVID environment and it is apparent that the return to normal won’t happen until later in 2021 at the earliest. We will continue to work with our property owners and our merchants to create an environment where they can both be as successful as possible. A partnership approach between the property owners and their tenants will be essential in 2021 as we fight through this difficult period together. Going forward, our market and our properties are well positioned to take advantage of regional growth that we believe will continue to be strong for the foreseeable future.
Diego Munoz
The largest growth sector, particularly in value, has been in flex and warehouse. We saw growth in the food-product industry as well as online retailers that were growing; they needed more space. While those sectors were growing, you had other sectors — like non-anchored retail spaces — that were hurting. The pandemic, while hurtful to society, added value to the flex and warehouse segments. The sector continues to grow in value because new development isn’t following suit in North Carolina as quickly as those industries would like.
( ) the lowest point on historical records, dropping 300 basis points, according to Cushman & Wakefield’s Q2 industrial report. Buoyed by high demand and strong rent performance, the Raleigh-Durham industrial market recorded more than 1 million square feet of new leasing activity throughout the quarter, up 45.6% year over year, according to the brokerage.
Overall net asking rent stands at $8.81 per square foot, a reported 12.8% increase quarter-over-quarter. The development pipeline remains strong with approximately 2.3 million square feet of industrial product under construction as of Q2 with about half of it already pre-leased. “In total, the product currently under construction across Raleigh-Durham is nearly 50% preleased as a whole,” Cushman & Wakefield reported.
Outside of notable Northeastern life science markets, such as Boston and Maryland, North Carolina anchors the Sun Belt’s life sciences industry base. The Tar Heel State is home to more than 770 life sciences companies with approximately 75% based in the Raleigh-Durham area, according to Avison Young’s 2Q21 Life Sciences Report. Home to legacy employers such as Pfizer, Biogen, Bayer Crop Science and Merck, and newcomers, such as Fujifilm Diosynth Biotechnologies and Gilead Sciences, the life science industry has an estimated economic impact of $84 billion, according to the brokerage firm, posing opportunities for investors, developers and construction firms.
“This market sector continues to provide us with great opportunities,” McDonald York Building Company President and CEO Tanner Holland told Invest:. “Probably about 60% of our business is in that market sector. But the life science arena has attracted so much interest outside of just the space requirements. Our region’s community college and university educational programs are expanding, we have both large and small pharmaceutical-type facilities choosing RaleighDurham and the talent pool continues to move into our region. The life science sector is just growing exponentially and our infrastructure supporting this growth has to grow with it. What we’ve noticed is the real estate market and its investors, both private equity and institutional investment folks, have started to increase their interest in our market and we have seen several large real estate purchases and acquisitions,” he said.
According to CRBE, the Raleigh-Durham market attracted approximately $469 million in venture capital funds in 1Q21, a 59% increase from 1Q20. “There is a lot of money being invested and our region continues to support and attract life science companies. From this activity, we’ve even seen real estate conversions from office to lab, or warehouse to research space. It’s a vibrant time,” Holland said.
Challenges From supply chain disruptions and sharp cost increases to a heightened focus on health and wellness to investor indecision, the pandemic forced industry leaders to stay nimble and contend with the challenges headon. Demand and supply chain issues have directly impacted the cost of materials, most notably lumber, copper and steel. Over the last 12 months, the cost of lumber has increased more than 56%, according to Cumming’s Domestic Material Price Trends analysis. Similarly, copper and brass mill shapes prices have increased more than 30% and steel pipe and tube prices are up more than 10%, the consulting firm reported.
“Overall, the biggest challenges right now are price escalation and supply chain issues. We were seeing major price escalation in wood products and later steel, ( )
