Raleigh Real Estate’s “Rock Steady” Growth

Impressive job growth is spurring the economy and real estate values in Raleigh, North Carolina. The Raleigh-Cary area experienced employment growth of 14 percent from 2000 to 2006, …

Impressive job growth is spurring the economy and real estate values in Raleigh, North Carolina. The Raleigh-Cary area experienced employment growth of 14 percent from 2000 to 2006, while the national growth rate in that period was just 5.8 percent, according to the Bureau of Labor Statistics.

Real estate investors seeking solid appreciation and a balanced, growing economy and population might want to consider the Raleigh, Durham and Chapel Hill area, also known as the Triangle Region. The area is home to the largest research park in the world and a highly educated population that attracts high tech, pharmaceutical, research, financial and other major employers. The area also benefits from state jobs and entrepreneurialism.


“The Research Triangle Region has added 86,000 new jobs in the past three years—midway into a five-year effort to improve the region’s competitive position and create new jobs,” according to the State of the Research Triangle Region May 2007 report.

The area has begun to gain attention for its strong job market; Raleigh was ranked as the number-one U.S. city for business and careers by Forbes in 2007.

Unemployment is low; the Raleigh-Cary unemployment rate was at 4.0 percent in June 2007, while Durham was at 4.3 percent, according to the Bureau of Labor Statistics.

High tech jobs are prominent, but after the dot-com bust, the employment market has been rounded out with more pharmaceutical, financial and distribution jobs, Scott Snyder, local investor and broker/owner of Raleigh Investment Real Estate, said.

Major employers include the state government, Duke University and Medical Center, the University of North Carolina at Chapel Hill, Wake County Public School System, IBM, North Carolina State University, WakeMed, GlaxoSmithKline, UNC Hospitals, Durham Public School Systems and Wal-Mart, according to the Research Triangle Research Partnership.

Research Triangle Park, the world’s largest research park, employs more than 39,000 people working for a total of 157 organizations, according to Research Triangle Park’s website.

Wachovia, Bank of America, Fidelity and Cisco are also prominent employers, and Novartis, Honda, Mercedes and Google are moving into the area, Snyder said.

Entrepreneurialism has become a key economic driver, with substantial small company growth, Steve Deaton, president of Deaton Investment Real Estate in Raleigh, said.

Higher learning center

Duke University in Durham, North Carolina State University in Raleigh, the University of North Carolina at Chapel Hill and many smaller institutions of higher learning are located in the region.

With Duke’s 12,398 students, NC State’s 29,854 and UNC Chapel Hill’s 26,359, according to the Research Triangle Research Partnership, student housing makes up a large part of the rental market near the universities. (For more information on student housing opportunities, see our articles on college town real estate and top 10 small college towns for investment.)

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“Anyone who’s open to student rentals…can find a wealth of opportunities in and around those universities,” Tiffany Elder, a Triangle area real estate broker and investor, said.

However, the student housing market became overbuilt four or five years ago, Deaton said. “We’re still recovering from that to some degree…though it’s improving the way the rest of the market is improving.”

“We’ve got big numbers projected for student populations, especially for NC State University because we’ve got an entire campus that’s being built that is as large as the original campus,” Deaton said.

A growth curve

Raleigh has 350,000 residents, while the Raleigh-Durham-Chapel Hill Metropolitan Statistical Area is home to 1.2 million, according to Raleigh’s tourism website.

At 24.8 percent, the Raleigh-Cary metropolitan area was ranked eighth in the nation for percentage of population growth between April 1, 2000, and July 1, 2006, according to the U.S. Census.

As evidence of the area’s “tremendous growth,” Mike Brady, a Raleigh real estate investor, said the Wake County School System has about 110,000 students and adds another 7,000 or 8,000 per year.

The strong job market and excellent public schools attract relocating families, Jan Wynns, a Raleigh real estate agent with Fonville Morisey Realty, said.

Institutions for higher education also attract many permanent residents. “A lot of people who have come through here to go to school fall in love with it [and] want to live here; they either stay or they come back eventually,” Deaton said.

Nice weather and an affordable cost of living appeal to both families and retirees. Raleigh was ranked fourth on Money magazine’s list of best places to live in 2006.

Many people who moved to Florida for retirement are now moving to the Carolinas to avoid inclement weather, Elder said. “That’s a definitely a growing demographic, and you see more housing that’s going in specifically targeting that age group.”

In addition, Raleigh’s younger population is shifting the structure of housing, Elder said. “We’re starting to notice more mixed-use development going in…that allows for a quick walk or bike ride to get to all the amenities that an individual might want, versus what was previously the norm in North Carolina, which was you had to pretty much drive to get to everything that you might need.”

Housing prices and rentals

Raleigh is currently on the beginning of a growth curve, making it a good time to get into the market, Elder said.

The market experienced a cycle of high vacancy rates and flat rental rates from 2001 to 2006, Deaton said. “And we’ve come out of that, gone through a bottom and now are in a very healthy apartment market as an owner and we’re seeing rents increase, we’re seeing vacancies decrease.”

The median existing home price in the Raleigh-Cary area was $212,200 in the first quarter of 2007, according to a National Association of Realtors study. A large percentage of the population can afford that median home, Elder said.

Home prices increased by 6.42 percent in Raleigh and 7.07 percent in Durham between the first quarter of 2006 and the first quarter of 2007, according to the Office of Federal Housing Enterprise Oversight.

Investors from other parts of the nation have begun investing in the area “because people have seen this just rock steady nature of growth,” Snyder said.

“We’ve just got such a stable economy here. We are not flashy. We don’t tend to be a boom/bust kind of a market,” Deaton said. “We’re very much a steady growth market.”

Raleigh “is one of those cash flow workhorses” with possible cash flow of 10 percent or more over and above principal, interest, taxes and insurance, Snyder said.

In the immediate downtown area, rental rates range from $500 to $700 for a one-bedroom apartment; $650 to $850 for a two-bedroom, two- or two-and-a-half-bath townhome; and from the mid $800s to the low $1,000s for a three-bedroom, Snyder said. Single family homes in the $120,000 to $130,000 range typically rent for $925 to $1,050, while higher-end single family homes can rent for $1,500 to $3,500 and up, he said.

Rental rates for a one-bedroom, one-bath property in north Raleigh would be $700 to $800 per month, but a similar unit downtown would be $1,200 to $1,400 and up, Eva VanAken, a property manager with Block and Associates in Cary, said. A two-bedroom would rent for $800 to $1,000, while a three-bedroom townhome or condo would rent for $900 to $1,200 and single family homes with four bedrooms or more range from $1,300 to more than $4,000 per month, she said.

Media attention

In recent years, Raleigh has attracted media attention for its job growth and quality of life from publications such as Forbes, Money, Business 2.0, Inc., Kiplinger, Black Enterprise, Men’s Health and Wired. Raleigh has shown up on the national scene and has begun to mature as a real estate market, Deaton said.

The number of out-of-state investors has risen recently, Snyder and Deaton agreed. Snyder said his client profile shifted from approximately 70 percent in-state investors to approximately 70 percent out-of-state investors during the last four years.

“Five years ago, we really didn’t have that many investors from out-of-state coming in here,” Deaton said. “Most of our calls today are from out-of-state investors.”

Elder said that a large percentage of her client base consists of investors who live outside of North Carolina but have realized the benefit of investing there.

Raleigh is no longer a little-known secret, but that does not mean it lacks opportunities. National publicity can create increased competition, but it can also boost a market. Steady population and job growth, along with housing affordability and appreciation, mean that Raleigh will continue to attract attention from investors.


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