T r i a n g u l a t e

cbreraleigh

TriangulateCREMay16

T r i a n g u l a t e

A CBRE|Raleigh Capital Markets Publication

Spring 2016

Featuring

The Rise of Downtown Durham:

The Duke Factor

Also:

• Population Growth Props Triangle Market

• The Global Economic Cycle: Not Baseball

• The Dawn of the Autonomous Vehicle

• The Internet of Things

Photo credit: www.movoto.com


Triangulate: Raleigh-Durham Insights

Population Growth Props Triangle Market

The Raleigh-Cary and Durham-Chapel Hill metros

independently receive their fair share of accolades

but are often overlooked in Top 40 metro

comparisons because they are not often linked as

one region. A CBRE study examined rankings of the

nation’s 381 metropolitan statistical areas and the

Triangle stood out noticeably as a combined region.

According to US Census population estimates

for 2015, Raleigh-Durham would rank as the 37 th

largest MSA in the nation. The Triangle’s absolute

growth between 2010 and 2015 ranks 20 th overall

just behind Charlotte, San Diego, and Tampa. The

statistical order fares even better when comparing

migration trends. The combined region would rank

16 th in the nation for net migration and 11th overall

for migration within the US. This is especially telling

considering Raleigh-Durham’s relative size.

An analysis of population growth trends indicates

that Raleigh-Durham is a leader among metropolitan

regions with populations over 1M people surpassed

only by Austin, TX and Las Vegas, NV.

A ranking of compounded annual growth rates

over the past fifteen years (between 2000-2015)

marks Raleigh-Durham as the 11 th fastest growing

region in the US and Raleigh-Cary alone ranks 5 th .

In a separate study, BizJournals estimates Raleigh-

Cary will lead the US in population growth through

2025.

Fastest Growing Metro Areas

CAGR

2000-2015

US

Rank

The Villages, FL MSA 5.49 1

St. George, UT MSA 3.69 2

Myrtle Beach-Conway, SC-NC MSA 3.19 3

Austin-Round Rock, TX MSA 3.19 4

Raleigh-Cary, NC Metro Area 3.17 5

Cape Coral-Fort Myers, FL MSA 3.15 6

Greeley, CO MSA 3.08 7

Provo-Orem, UT MSA 2.99 8

Las Vegas-Henderson, NV MSA 2.91 9

Bend-Redmond, OR MSA 2.83 10

Raleigh-Durham Combined MSA 2.71 11*

Regional Population Comparisons

Metro Area

2015

pop.

US

Rank

Pop. Change

2010-2015

US

Rank

Net

Migration

U S

Rank

Domestic

Migration

Charlotte-Concord-Gastonia, NC-SC MSA 2,426,363 22 209,115 17 140,115 14 110,787 9

Austin-Round Rock, TX MSA 2,000,860 33 284,547 11 192,904 8 159,248 4

Nashville-Davidson, TN MSA 1,830,345 36 159,449 23 105,958 16 83,879 11

Raleigh-Durham Combined MSAs 1,826,061 37* 188,939 20* 123,345 16* 89,410 11*

Raleigh-Cary, NC Metro Area 1,273,568 44 143,077 24 94,090 19 72,375 13

Durham-Chapel Hill, NC Metro Area 552,493 98 45,862 53 29,255 47 17,035 46

Virginia Beach-Newport News, VA-NC MSA 1,724,876 37 48,059 51 -1,722 281 -31,759 373

Greensboro-Winston-Salem Combined MSAs 1,411,487 41* 47,112 53* 27,298 49* 13,637 58*

Richmond, VA MSA 1,271,334 45 63,254 41 36,940 38 17,996 42

Greenville-Anderson, SC MSA 874,869 63 50,762 47 35,326 41 27,736 28

Columbia, SC MSA 810,068 71 42,591 60 25,578 49 17,511 44

Charleston-North Charleston, SC MSA 744,526 75 79,883 36 55,450 29 49,909 20

Asheville, NC MSA 446,840 116 21,980 99 21,899 52 20,285 38

Myrtle Beach-Conway, SC-NC MSA 431,964 123 55,242 44 54,080 32 52,197 19

Fayetteville, NC MSA 376,509 141 10,126 163 -11,417 370 -21,523 364

Wilmington, NC MSA 277,969 171 23,085 96 19,017 63 17,360 45

US

Rank

* Ranking if combined MSA; Source: US Census Bureau/CBRE|Raleigh


A CBRE|Raleigh Capital Markets Publication

The Rise of Downtown Durham: The Duke Factor

The rapid rise of Downtown Durham caught many

long-term residents by surprise, but the submarket’s

resurgence has irrefutably tilted the Triangle’s real

estate balance and serves as a model for other midsize

downtowns. While there are many contributing

factors to Durham’s rebirth, none are as prolific as

the commitment of its largest employer and anchor

institution – Duke University. Only twenty years ago,

Downtown Durham resembled a ghost of its industrial

past. A few pioneers such as Andy Widmark, Clay

Hamner, and the late-Franklin Wittenberg made

strategic investments or built anew, but it was not

until the redevelopment of two of Durham’s largest

empty tobacco fortresses, the former Liggett & Myers

and American Tobacco manufacturing facilities with

over 2 million SF combined, that Durham’s modern

renaissance gained momentum. Now the center city

is at risk of not keeping pace with office demand

while boasting a Class A vacancy rate of only 0.76%.

The office market is not the only healthy category.

The greater downtown area (which includes the Ninth

Street district) has ushered in 1,639 new apartment

units since 2014, and three additional communities

totaling 673 units are under construction in

downtown proper. Notable developments include

One City Center, a mixed-use tower by Austin

Lawrence Partners, which will include 117 units on its

upper floors. East-West Partners is underway with

Liberty Warehouse in the trendy Central Park area

of north Downtown. And Woodfield Investment has

broken ground on the 305-unit Woodfield Gateway

on the south side near Durham Bulls Athletic Park.

Resident demand and investor appetite remains

robust evidenced by the sale earlier this year of

historic West Village, incorporating 609-units, by

CBRE on behalf of Federal Capital Partners for $187

million.

Four new hotels opened during 2015 in Downtown

Durham, the majority incorporating elements of

historic adaptive reuse, including the 21C Museum

Hotel in the former 17-story CCB/Suntrust building;

a new 134-room Aloft hotel adjacent to the Durham

Performing Arts Center; the 54-room Hotel

Durham in the former Mutual Community Savings

Bank building; and The Residence Inn by Marriott,

preserving a portion of the former McPherson

Hospital building, near Brightleaf Square.W

continued on page 4


Triangulate: Raleigh-Durham Insights

The Rise of Downtown Durham: The Duke Factor con’t

(continued from page 3)

21c Museum Hotel; Photo credit: www.21cmuseumhotels.com

Full Steam Brewery; Photo credit: blogs.library.duke.edu

And Duke continues to grow. Several

developers are attempting to

address the shortage of office space

in Downtown Durham, and Duke is

holding firm in its sponsorship of

Durham’s resurgence and solving

for expected growth. The university

recently leased 100,000SF within

The Chesterfield, a development

of Baltimore-based Wexford,

incorporating 284,000SF of life

sciences space within one of the

last undeveloped former tobacco

manufacturing buildings downtown.

Duke also committed to lease

55,000SF within One City Center

scheduled for 2018 delivery. And

Duke is collaborating with Bostonbased

Longfellow Partners and

Measurement Inc. in the development

of the Durham Innovation District

(“Durham ID”), a 15 acre masterplanned

downtown research hub. Two

office buildings totaling 300,000SF

are scheduled to break ground this

year within Durham ID.

There is no doubt that Downtown

Durham’s momentum is here to

stay. Spurred by Duke University’s

unyielding support and visionary

leadership, Downtown Durham is

rapidly earning a name among the

best places to live, work, and play in

national technology and innovation

circles. A continuum of start-ups

and an entrepreneurial community

downtown are the seeds of future

economic growth. Now the locals are

not as surprised.

American Tobacco Campus; Photo credit: www.mynchomes.com


A CBRE|Raleigh Capital Markets Publication

The Global Economic Cycle: Not Baseball

Analogies to baseball are not unusual in real estate

discussions, especially when trying to pinpoint the

real estate cycle: what inning are we in? But the

economy is not baseball; there is little means to

precisely forecast whether the game will be called

short, have rain delays, or go extra innings. Richard

Barkham, PhD MRICS CRE, Global Chief Economist

for CBRE based in London, UK, recently spoke at

the UNC Real Estate Conference in Chapel Hill and

the CBRE Multifamily Conference in Chicago and

shared his insights about where we are in the cycle

largely based upon a key global economic metric:

US unemployment.

According to Barkham, the US unemployment rate

has correlated well with economic cycles and the

performance of each US property sector. Essentially,

the US unemployment rate is forecast to achieve

a 20 year cyclical low in late 2018. Normally wage

pressures push up inflation which in turn triggers

higher interest rates, and neither is occurring.

Barkham reminds, the typical economic cycle rarely

last longer than 9 years and it has been 6.5 years

since the Great Recession ending in late 2009.

U.S. Unemployment: A Good, Clear Cyclical Indicator

U.S. UNEMPLOYMENT: A GOOD, CLEAR CYCLICAL INDICATOR

U3 Unemployment (%)

12

10

8

6

4

2

0

Full term?

Jan-70

Jan-71

Jan-72

Jan-73

Jan-74

Jan-75

Jan-76

Jan-77

Jan-78

Jan-79

Jan-80

Jan-81

Jan-82

Jan-83

Jan-84

Jan-85

Jan-86

Jan-87

Jan-88

Jan-89

Jan-90

Jan-91

Jan-92

Jan-93

Jan-94

Jan-95

Jan-96

Jan-97

Jan-98

Jan-99

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

Jan-13

Jan-14

Jan-15

Jan-16

Source: CBRE Econometric Advisors and Macrobond, CBRE Research.

Very Correlated with U.S. Real Estate

VERY CORRELATED WITH U.S. REAL ESTATE

Vacancy and unemployment (%)

20.0

18.0

16.0

14.0

12.0

10.0

8.0

6.0

4.0

3 CBRE | GLOBAL ECONOMY & REAL ESTATE MARKETS

Office Vacancy Industrial Vacancy Apartment Vacancy Unemployment

Professor

Barkham’s

key metric is

not without

detractors,

but as

with any

renowned

economist

he left the

answer to

where we

are in the

economic

cycle open

for the

observer

to draw

their own

conclusions.

2.0

Source: CBRE Econometric Advisors and Macrobond, CBRE Research.

Source: CBRE Econometric Advisors and Macrobond, CBRE Research

7 CBRE | GLOBAL ECONOMY & REAL ESTATE MARKETS


Triangulate: Raleigh-Durham Insights

Image credit: bosch-mobility-solutions.com

The Dawn of the Autonomous Vehicle

Rapidly evolving technologies have made fully

driverless, autonomous vehicles a not-to-distant

reality. Almost all major automakers, Google, Uber,

and others have allocated enormous resources

to not only bring the concept to fruition but

to address policy issues in a highly regulated

industry with paramount concern for public safety.

Estimates vary on exactly when roads will be abuzz

with autonomous cars, but the age of connected

vehicles is already among us, and the way cities

have historically integrated transportation and

parking into their infrastructure is subject to major

disruption.

According to a report released by the Urban

League of Cities, only six percent of major US

cities are factoring the impact of autonomous

vehicles into their long-range transportation plans.

Driverless technologies have become a rallying cry

for opponents of expensive mass transit systems,

such as the light-rail system proceeding in Raleigh

and Durham.

The taxi market is forecast to be effected

earliest by driverless technologies. Already, San

Francisco’s traditional taxi rides have declined by

65% over the past three years according to The

Atlantic, possibly due to Uber, Lyft, and other ride

sharing services. In the near future, high-density

areas will see fleets of autonomous vehicles

providing taxi services. Eventually, cities will face

big questions about the need for large amounts

of parking and expenditures related to public

transportation with greater “on demand” driving

led by autonomous vehicles that seldom park.

According to the Brookings Institute, autonomous

transportation will expand roadway capacities

and reduce congestion. Imagine streets with no

stoplights and signs, smaller gaps between vehicles

due to sensors and connectivity, and smart systems

that efficiently route vehicles around dense

traffic. Key notions of urban design will be altered

beginning with parking. Planners may be forced to

reconsider the traditional ramped parking garage

with designs that could be re-purposed in the

future along with reduced parking requirements.

Raleigh, Durham and Chapel Hill could be on the

forefront of ingenious parking and transportation

solutions of the future while our central business

districts and urban nodes are at the cusp of

impending densities.


A CBRE|Raleigh Capital Markets Publication

The Internet of Things: The Future Is Among Us*

Think industrial is not techie?

Think again. Wireless technologies

are rapidly changing business

as usual across manufacturing

operations and logistics, forcing

most companies to adopt

strategies and design processes to

adapt to the “internet of things”.

The Internet of Things (IoT)

generally describes an advanced

level of network connectivity

between physical objects

or “things” that enables the

exchange of data and performance of tasks

across platforms and systems without human

intervention. The revolutionary premise behind

IoT is that anything, living or manufactured, has

the ability to transmit data over a network. Made

up of billions of sensors and devices that generate

incessant streams of data, the IoT can be used to

improve efficiencies in business in unfathomable

ways.

IDATE Consulting & Research forecasts that in

2020 there will be 80 billion internet-connected

things, up from 15 billion in 2012. This figure

includes household smart devices, but “the vast

majority (85%) will be objects like car tires or

shipping pallets.” The implications up and down

the supply chain, from inventory management to

transportation, are endless: sensors for real-time

tracking, temperature control, driver behavior and

safety, scheduling maintenance of equipment and

machines, automated communication between

devices on the shop floor, etc. We are literally

ushering in an age of end-to-end transparency

that will allow efficient coordination and better

decision-making in sourcing, supply, demand,

capacity, and quality control across the spectrum.

According to the Economist Intelligence Unit

survey (June 2013), “Only 9% of senior managers

believe that IoT will not change the way their

company conducts its business in a meaningful

way”. Specific skills are already required by most

companies for the next stage of IoT development

and to harness an overwhelming surge in IoT

generated data and analytics. And tech enthusiasts

at NC State University in Raleigh are positioning

the Triangle to be a national center of IoT. Students

and professors within the University’s Electrical and

Computer Engineering Department are active with

the non-profit Wireless Center of North Carolina

in their sponsorship of NC RIoT (NC’s Regional

Internet of Things) to advocate and showcase

emerging technologies in the IoT space. Smart

idea, since many large Raleigh-Durham employers

are leaders in the field: SAS, Verizon, Cisco, GE, and

IBM to name a few.

Raleigh-Durham, with a high percentage of

technology workers, is perfectly-suited to

accommodate changes occurring in advanced

manufacturing and connected logistics. One

“thing” appears clear: the future is among us, and

CBRE| Raleigh has taken notice.

*Article previously published in Intersect, Fall 2015 Edition, A CBRE Industrial Publication

(www.cbre.com/raleigh)


Ben Kilgore

Executive Vice President

ben.kilgore@cbre-raleigh.com

919.831.8191

Jeff Glenn

Executive Vice President

jeff.glenn@cbre-raleigh.com

919.831.8186

Joe Graham

Senior Vice President

joe.graham@cbre-raleigh.com

919.831.8196

Jim McMillan

Vice President

jim.mcmillan@cbre-raleigh.com

919.831.8204

Roger Edwards

First Vice President, CBRE, Inc.

roger.edwards@cbre.com

919.831.8262

CBRE|Raleigh

555 Fayetteville Street

Suite 800

Raleigh, NC 27601

919.831.8200

Part of the CBRE affiliate network

© 2016 CB Richard Ellis-Raleigh, LLC, a Delaware limited liability company. The opinions contained in this article represent the opinions of the author

and not the opinions of CB Richard Ellis-Raleigh, LLC, a Delaware limited liability company. The information contained in this article was obtained by

the author from sources believed reliable but have not been verified, so are for informational purposes only. Neither the author nor CB Richard Ellis-

Raleigh, LLC, a Delaware limited liability company. makes any guarantee, warranty or representation about anything contained in this article.

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