If, like me, you’ve taken a look at the “Commercial Real Estate” tab of the Triangle Business Journal recently, you probably also noticed that most, if not all, of recent headlines involve land or building space being freed up or purchased for development. On Wednesday, 20 October, these were the first headlines available:
Whether you’re in Raleigh, Clayton, Cary, or Morrisville, the bottom line is that space is at a premium. We can’t make more of it, and with somewhat-recent announcements of Amazon and Apple bringing major operations to the area, we can’t keep up with the demand for what space we do have available.
With these multinational companies bringing operations to the area comes multinational companies interested in buying up real estate for new employees to live in. If you’ve received a “We would love to buy your house!” form letter in the mail recently, even though you haven’t thought about selling, chances are it came from one of these companies. Rental prices are higher than most mortgage payments these days, so who wouldn’t want to become a landlord housing these folks?
Just spend an afternoon driving around downtown Raleigh and look at the effects of active gentrification and new tear-down-to-build-new projects on every block and you’ll start to understand just how excited Raleigh-ites (both current and future) are to get new residents set up in new homes. California cities like San Francisco and L.A. showed us how they fit a high population density in a small geographic area – tall and skinny buildings. A wide & low footprint is far less efficient than a thin & tall one when it comes to how many residents you can put in one building.
Whether you are working in residential or commercial real estate, these supply and demand pressures brought on by a current (and future) influx of residents are bound to continue to frustrate. Buyers and tenants may find themselves surprised by current market prices compared to metrics not even two years old, while sellers and landlords will have more competition for their inventory amongst scarce availability.
A notable example of continuing price increases occurred just last week when a Canadian-based LLC called Indigo Acquisitions purchased a 489-unit apartment complex in Morrisville for a whopping $121.9 million. The seller purchased the complex in 2019 for $59 million and renovated the community. This sale marks the largest multifamily real estate sale in North Carolina history, excluding apartment portfolio and student housing sales.
Another example of this increasing rate of price increase came on Friday, 22 October, when the Reserve at Patterson Place, a Durham apartment community, was purchased for $104 million. A mere 13 months ago, the community sold for $80.2 million. That’s a nearly $24 million increase in just over a year. Rental rates for the community range from $1,226-$2,921 per month.
We are living through a time of huge record-breaking activity in Triangle real estate. This Morrisville sale may not hold its record title for long as more and more international corporations continue to finger Raleigh-Durham as a growing area in which they could make money via real estate holdings.
Whether you’re happy about these changes or would rather go back to the Raleigh of the twentieth century, there’s no denying that now is the time to get your foot in the door of commercial real estate if you haven’t already. If you’ve been considering holding off on making that land deal until prices settle, don’t wait! You’ll just find yourself frustrated that you didn’t act sooner and save yourself some money in the long run.
Contact Kima Commercial for expert guidance and advice. We are here for you every step of the way.