Raleigh-Durham Overtakes Austin as the Hottest Real Estate Area
North Carolina Region’s Life Sciences Research May Help Edge Out Texas Capital.
Raleigh-Durham in North Carolina overtook greater Austin, Texas, as the hottest metropolitan area for real estate prospects in 2021 in a new ranking by an influential land use research group.
Real estate industry professionals around the country improved their opinion of the Raleigh-Durham area, known for its role in life sciences research and manufacturing, enough to move it from second place last year to No. 1 in the Urban Land Institute’s annual “Emerging Trends in Real Estate” 2021 report. That pushed Austin down to second, while Nashville, Tennessee, retained its third place spot.
“These markets offer growing and educated job bases, and some walkable urban submarkets, but unlike their larger coastal brethren, they have lower housing and business costs, which create attractive lifestyles,” according to the report. “Office nodes in these markets can also be accessed more easily via car— an attractive attribute, at least in the short term.”
The Urban Land Institute’s report is a confluence of surveys and direct interviews with nearly 1,700 real estate professionals, including property owners and developers, investors, bankers and homebuilders.
The Raleigh-Durham area has shown resilience during the pandemic. Real estate services firm CBRE in June listed Durham as the top U.S. market, with resilient industries — healthcare, government and technology — making up the highest percentage of its workforce at 40.9%.
The Raleigh-Durham area has been a sought-after market by technology companies in recent years partly because of its tech labor pool: About 53.3% of residents who are 25 and older have a bachelor’s degree or higher, significantly more than the U.S. average of 32.6%, according to CBRE’s 2020 tech talent report.
The area is home to a life sciences hub called the Research Triangle that is funded in part by federal dollars and connects the University of North Carolina at Chapel Hill, Duke University in Durham and North Carolina State University in Raleigh.
Raleigh-Durham, where the average annual tech salary is $98,326, is also relatively more affordable for tech employers than areas such as Silicon Valley, which has the highest average annual tech salary in the nation at $136,060, according to the CBRE report.
“Raleigh-Durham has been the beneficiary of a number of expansions from companies” in life sciences such as Integrated DNA Technologies, Grail, and Eli Lilly,” said Victoria Lim, CoStar’s Raleigh market analyst. “IDT’s expansion is directly related to coronavirus as its new facility in Research Triangle Park will be used to produce Covid testing and research products.”
Out of the professionals ULI surveyed, 73% recommended buying industrial property in the Raleigh-Durham area, giving it the highest rating among the cities. None recommended selling.
Some of the biggest year-over-year changes in the rankings on the ULI report included New York’s Long Island area, which made the biggest jump, rising to the 10th spot from No. 57.
Salt Lake City vaulted to seventh place from No. 22 last year and San Antonio rose to No. 12 from 24 last year, joining other Texas areas like Dallas-Fort Worth and Austin in the top dozen spots. The Washington, D.C.-Northern Virginia region moved up six spots to No. 8.
Meanwhile, Los Angeles dropped to No. 28 from ninth last year, a slide that could have been influenced by the pandemic. California was one the first states to shut down businesses with the hope of slowing the spread of the virus. It has been slower than others to fully reopen. For example, Walt Disney Co.’s flagship amusement park Disneyland in Anaheim, California, has yet to reopen while Disney World in Orlando reopened in mid-July.
All the cities on the ULI report in the Silicon Valley area outside San Francisco fell in the rankings year over year. San Francisco dropped to No. 60 from No. 12 last year, San Jose fell to No. 32 from No. 13 and Oakland-East Bay moved down six spots to No. 36.
The Silicon Valley has the second-highest average monthly apartment rent in the United States, at about $2,874, behind New York City’s average of about $4,042, according to the CBRE report, which doesn’t break out New York City by borough as the ULI report does. New York’s Manhattan area fell to No. 65 from No. 40 last year.
California, meanwhile, has been taking steps to prevent evictions. In September, state lawmakers passed legislation that prevents landlords from evicting renters who are struggling financially because of the pandemic through February.
Seattle fell to 34 from No. 10 last year on the ULI report. The city has not only been hurt by the pandemic but also has been dealing with a chronic homeless problem.
Meanwhile, Orlando dropped to No. 24 from seventh last year as its economy suffers from the loss of conventions and corporate meetings. In the ULI report, 41% of those surveyed recommended selling retail properties in Orlando, the highest sell recommendation on the list. Orlando’s retail market was one of the strongest in the country before the pandemic.
“As the metro with the second-highest proportion of jobs in the retail trade and leisure and hospitality sectors among large U.S. markets, Orlando is among the most vulnerable during this economic downturn and the retail sector is expected to be the hardest hit,” a CoStar market report noted.
And while Austin and Nashville both remained in the top three spots this year, the cities have suffered economic blows from the pandemic. Austin and Nashville have both felt the shock in the hospitality industry, in particular, with big events being canceled and leaving hotels empty.
The for-profit healthcare industry in Nashville, Tennessee, a city with one of the largest concentrations in the United States, was pinched as well. The Nashville Health Care Council, an industry membership group, estimates the industry generates $46.7 billion in revenue to the local economy annually.
Tennessee had a 40.4% decline in gross domestic product in the second quarter from the first quarter, the third-largest drop in the country behind Nevada and Hawaii, according to data from the Bureau of Economic Analysis. Nashville’s GDP drop was spread out among several sectors led by healthcare, followed by hotels and food and arts and entertainment.
By comparison, GDP in Texas dropped 29% for the quarter and was spread across numerous industries.
Original Article Source: CoStar News