Downtown Raleigh’s economy bounced back in the first half of 2021, report shows
After more than a year of the pandemic and last summer’s violent protests, downtown Raleigh has seen an upward economic trend over the start of the summer this year, a quarterly report from the Downtown Raleigh Alliance shows.
More new businesses opened than closed and more square feet of office space was rented than vacated in 2021’s second quarter of April through June, the report said.
“In every single (data) segment, there is a lot of positive data, positive momentum, which is just beyond fantastic to see this early,” DRA economic development director Will Gaskins said in an interview.
Downtown food and beverage sales in the second quarter totaled to $57.6 million, a 215% increase from a year prior, when stay-at-home orders began and indoor dining stopped. It’s also 56% increase from the first three months of 2021.
Over half of those sales were just in the Glenwood South bar and nightclub district and the rest divided mostly evenly across the Warehouse District, Moore Square and Fayetteville Street.
“Fayetteville Street was one of the great points from this report because with the return of employees and office buildings, we saw a substantial jump in the Fayetteville Street-specific portion of sales,” said Gaskins.
The sales increase amounts to roughly 90% of pre-pandemic downtown sales in late 2019, according to the most recent sales data that the DRA has.
“We’ve had a really strong bounce back,” said Michael Thor, co-owner of the restaurant Whiskey Kitchen. “We saw our business return to pre-COVID levels.”
Even without being able to hire all the necessary employees and having to close at midnight, two hours earlier than before the pandemic, the restaurant is competing with its 2019 food and drink sales, Thor said.
Most every night there is a wait for tables and lunch activity has spiked significantly in the warmer months when outdoor patio seating is popular, which also coincided with the return of more workers to offices downtown.
The dark cloud on the horizon for the third quarter is the delta variant, which is surging in North Carolina and across the country, mostly among people who have not received a coronavirus vaccine.
New mask mandates and rising COVID-19 cases due to the delta variant have already started to reflect in sales with indoor diners and bar patrons beginning to decrease, Thor pointed out.
Because of this, future business for restaurants like his is an “impossible call to make” currently, he said.
“We’re just gonna have to wait and see what happens with the delta variant and the cases we’re gonna be seeing into the winter.”
New businesses open doors
In the second quarter, 16 new storefronts opened or expanded downtown, bringing the total of these to 36 storefronts opening this year, a 61% increase compared to a year prior, the report says. Only two businesses closed. An additional 27 businesses that closed due to the pandemic reopened this year.
“At the storefront level, there’s just a tremendous amount of positive momentum and energy,” Gaskins said.
The average daily pedestrian traffic tracked by DRA’s pedestrian counters throughout downtown in the second quarter was 7,266 and increase of about 129% from 3,167 tracked a year earlier.
One new business is plant shop Urban Pothos on West Peace Street, which opened in June.
“At the beginning when we opened it was kind of wild, we sold out of everything the first day, it was insane,” Urban Pothos owner José Harvey told The News & Observer. “But as time has progressed, I would say that we stay steady busy. ... We’re able to hit our sales goals and make sure that our bills are paid and make a profit.”
Harvey says it’s advantageous to do business in downtown where “people are trying to bring nature indoors to their spaces within this very urban area and I think that that really helps us out,” he said.
More small retail growth is possible for downtown, Harvey said, if the city can provide more financial support, such as a grant program or rent assistance programs.
“Getting started is the hardest part,” he said. “It was a struggle for us. We’re doing really well, but not everybody has that.”
Real estate eyes a comeback
Downtown office real estate also is on an upward trend with more downtown office space being occupied than vacated for the first time since the pandemic’s onset, according to real estate data firm JLL.
In the second quarter, 88,634 square feet of new Class A office space was leased, a majority of that part of the new tower Two at Bloc[83] building on Hillsborough Street.
A total of 512,252 square feet of office space was under construction in the quarter, with 1.3 million square feet of office space planned or proposed downtown with bullish real estate firms seeking to build more.
Downtown apartment occupancy remained high at 95.9% with available units being rented rapidly. Rents rose to $2.03 per square foot — up nearly 10% from the first quarter of 2021, according to Costar data. At that rate, a 500-square-foot apartment would rent for $1,015.
There were 322 housing units under construction in the second quarter, and about 4,650 planned or proposed.
“Raleigh is in a little bit of the national light, or spotlight, particularly from a real estate investment perspective,” said Gaskins.
The report highlights an increase of housing to come from major residential developments underway downtown. This includes the redevelopment of Seaboard Station on West Peace Street into a mixed-use housing and retail site, whose first phase will include 298 units by mid-2022.
This story was originally published August 25, 2021 at 2:57 PM with the headline "Downtown Raleigh’s economy bounced back in the first half of 2021, report shows."
