New residents, businesses remaking downtown Raleigh. What’s in the $5 billion pipeline?

For over a decade, The Green Monkey resided on the fridges of downtown Raleigh.

Then owner Rusty Sutton decided to move his quirky gift gallery and craft beer bar to South Wilmington Street last month.

Already, business has picked up, he said. “There’s way more traffic down here and a lot of good energy. With the price per square footage under $30, it’s not much difference.”

The Green Monkey is one of dozens of new businesses to set up shop along this corridor in just the last year.

As the city’s population swells, Raleigh is seeing a post-pandemic construction boom, with new and planned apartments on track to double the number of people living downtown in the next five years, according to the Downtown Raleigh Alliance.

The development pipeline includes $1.2 billion worth of projects under construction and another $3.8 billion in planned projects, the alliance announced in a State of Downtown report released Wednesday. Roughly 2,900 housing units are currently being prepped or built.

“That’s the most housing units under construction in downtown’s history,” said Bill King, the DRA’s chief executive officer. “We have more cranes over downtown than we’ve ever had. Most of them are building housing.”

With another 6,993 units already planned over the next decade, the city ranks among the nation’s top contractors of new apartments, surpassing large hubs likes Seattle and San Francisco, according to the latest data from RentCafe.

The alliance presented its findings during its annual State of Downtown event before a 600-person crowd at Martin Marietta Center for the Performing Arts.

When fully delivered, this pipeline will “more than double the current downtown resident population,” the report said. At present, more than 19,000 people live within a mile of downtown Raleigh.

For a capital city historically anchored by office and government uses, it’s a major shift. However, there’s still room for improvement, said David Meeker, a Raleigh native and alliance board member.

“Our downtown is still recovering,” Meeker said. “Fayetteville Street is not where we want it to be yet.”

Here’s a breakdown of the 80-page report:

Housing demand strong, occupancy rates high

Despite Raleigh’s surge in apartment construction, downtown residential occupancy remains high at 94%.

Every downtown district has seen significant growth since 2015, the report noted, especially Glenwood South and the Warehouse District, which are adding 1,430 and 2,926 units, respectively.

While rent in downtown has increased 20% since 2019, it’s relatively flat this year. The average two-bedroom apartment rents for $1,872 per month.

Meanwhile, the for-sale housing market is slowly cooling as interest rates rise.

The median listing price for a single-family home currently hovers at $757,059, the report notes The median price per square foot is $427, up 31% since 2020.

Still, demand remains strong for new construction. Of the 268 for-sale units under construction or completed since 2015, only 22 remain available.

Tourism money

Over 3.7 million unique visitors headed to downtown Raleigh in the past year, a 16% hike year over year.

The city’s hotels bounced back to pre-pandemic levels, with hotel revenues spiking 20% over the last year.

And an influx of public money is set to be spent downtown in the coming decades.

Raleigh and Wake County leaders agreed to spend tourism money to renovate the Raleigh Convention Center, move Red Hat Amphitheater and build a new hotel near the Martin Marietta Center for the Performing Arts.

The money comes from taxes on hotel stays and prepared food and beverages purchased within the county.

Not having enough convention space and hotels near the convention center has kept Raleigh from booking larger events, Mayor Mary-Ann Baldwin said.

“We don’t have enough convention space and we don’t have enough quality hotels,” she said. “This will address that issue and allow us to expand our convention business.”

Economic development strategy

After a post-pandemic slump, Raleigh’s business district is pressing ahead with its recovery.

The city and DRA are working on a development strategy, focusing on:

• A retail strategy for downtown emphasizing Fayetteville Street

• The downtown Raleigh office market

• Opportunities for minority- and women-owned businesses

• Catalytic projects to grow the downtown economy.

“Fayetteville Street is our Main Street,” Baldwin said in a news release announcing the efforts. “Focusing on how we enhance its offerings, vibrancy and appearance, along with making downtown as a whole even more competitive economically, is critical to our downtown.”

A draft plan is set to be released early next year with a final plan expected in June, according to the DRA’s website.

Meanwhile, a net 67 new storefront businesses have opened since 2020. More than 39 of those opened or expanded this year alone.

Over 90% of downtown shops, like The Green Monkey, are locally owned and independently operated, the report noted.

On the downside: The downtown area is facing a renewed focus on crime, in particular in Glenwood South.

A downtown restaurant employee was killed on Glenwood Avenue earlier this month, and the city is considering hiring private security to patrol parts of downtown including near the transit center.

“We are taking a full, all-hands-on-deck approach in terms of the safety of our city,” Police Chief Estella Patterson said. “We have security guards who are working with security companies across the city. So we are not looking to replace security guards for our officers but we are looking instead to supplement what we already have within the city.”

Office vacancies up

Downtown Raleigh’s overall office vacancy rate has edged upward since the pandemic, amid hybrid work, surging interest rates and tech layoffs. Sublease vacancy rates have hit record highs across the Triangle.

However, tenants are continuing their “flight to quality,” according to the alliance, with newer properties attracting the lion’s share of the interest.

The eight most marquee Class A office buildings have seen 109,840 square feet of positive net absorption so far this year, the report states. That’s on top of an additional 404,555 square feet in 2002.

“It’s all about a race to amenities,” said Brian Leary, Highwood Properties’ executive vice president, during a panel discussion Wednesday.

Going forward, this type of office space will be in limited supply, the report adds.

The highly anticipated 400H mixed-use tower, at the intersection of Hillsborough and West streets, is the only building set to deliver within the year.

No other new office development is under construction, though multiple projects remain planned in the pipeline.