Market Spotlight: Raleigh, North Carolina

Nicknamed the “City of Oaks” for its sheer number of majestic oak trees which line the streets, the Raleigh market is booming and continues to show tremendous job growth and population growth – two key factors we look for in any market we invest in.

Despite its relatively modest size, Raleigh has above-average levels of economic diversity and white-collar employment, factors that explain the strong investor appeal and will help this market sustain further high growth in the years ahead.

To date, we’ve invested in two multifamily properties in the Raleigh market, both of which had successful exits within the last year, exceeding original projections in both cases. Given that, we have seen firsthand how strong the Raleigh market is and continue to see tremendous potential in this market.

In this article, we’ll dive into the Raleigh market and why it’s on our radar as one of the top growing markets you want to be investing in.

Why We Love Raleigh

Raleigh is the capital city of North Carolina, and together with Chapel Hill and Durham, these three cities make up the area known as the Research Triangle. Within this area are three large world-renowned research universities that regularly attract scholars, researchers, and professors – Duke University, the University of Carolina at Chapel Hill, and North Carolina State University.

At the heart of this region is Research Triangle Park (RTP), the largest research park in the US, which is home to over 300 companies, 55,000+ employees, and 10,000+ contractors. RTP’s continual innovation and growth have led the Raleigh MSA to be ranked #1 in the US in job growth related to STEM (science, technology, engineering, and mathematics).

Raleigh is also known for its young, well-educated population, an easy-going lifestyle, and a bustling nightlife. The city’s inviting setting, with plenty of parkland, museums, a performing arts center, and a prosperous job market continues drawing new residents and retaining the student population after they graduate from the local universities. These favorable conditions create many exciting multifamily investment opportunities in the city of Raleigh.

On top of that, the 2022 Emerging Trends in Real Estate ranked Raleigh-Durham as the #2 market in the country to watch for overall real estate prospects, as well as one of the top 3 growing metros in the country. The two top-rated metro areas in the Emerging Trends survey – Nashville and Raleigh-Durham – each have fewer than 2.5 million people. But they are growing explosively and have shown impressive economic staying power even in a pandemic. The Raleigh area also regained jobs lost in the downturn much faster than other cities, showing tremendous resilience and strong continued growth.

Raleigh-Durham and surrounding sub-markets continue to be a hotbed for multifamily investors and developers. While the world continues to recover from COVID-19 and its effects on commercial real estate, the multifamily sector has continued to thrive. Increased population growth in the Raleigh-Durham market, which is buoyed by the region’s education and healthcare, has led to significant investment by employers nationwide to call Raleigh-Durham home, thus bolstering the multifamily market, with no sign of slowing down in the near future.

Given the strong job growth, population growth, and job diversity, we continue to be incredibly bullish on the Raleigh-Durham market and believe that its growth will continue for years to come.

Why People Are Moving to Raleigh

The Raleigh area boasts the quality of life that attracts young and talented people to the area and encourages the college students in the area to stay once their professional careers begin. With the robust job market, multitude of activities, and mild climate, the Raleigh-Durham market is the perfect place to call home and start a family.

In fact, Raleigh was named #12 out of the top 100 places to call home by Livability in 2021, due in part to its plentiful jobs, strong economy, high quality of life, and great health care. People are moving to the Raleigh metro area with the promise of not just finding jobs, but the opportunity to land high-paying jobs of the future.

Anchored by top-ranked universities including Duke University, University of North Carolina at Chapel Hill, and North Carolina State University, as well as world-class medical centers and the seat of state government, the Research Triangle is proving to be a magnet for talent and a cluster of innovation, with Research Triangle Park home to 55,000+ jobs and growing.

The Raleigh-Durham metro area ranks #6 among the best places to live in the United States, according to the U.S. News & World Report’s 2022 list. It’s the second consecutive year in which the two Triangle cities made U.S. News’ Top 10 out of 150 metro areas.

The Raleigh-Durham metro also ranked as the #1 Best Place to Live in North Carolina, drawing young professionals and retirees to the area alike. Here are some additional highlights you should know about the Raleigh-Durham metro area:

Raleigh is home to nearly 468,000 people in the city and 1.4 million in the metropolitan area, making it the second-largest city in North Carolina.
The population of the city of Raleigh has grown by 0.89% year-over-year and, according to the most recent U.S. Census, by 15.8% over the past 10 years.
Raleigh-Durham is ranked as one of the fastest-growing places in the country, with university grads electing to stay while others come to the city for job opportunities.
The population of Raleigh is projected to grow by nearly 125,000 people over the next 15 years.

This high velocity of growth, together with the rising cost of homes in the Raleigh-Durham area, mean that demand for housing will continue to rise, but affordability will fall. That’s exactly why we continue to invest in multifamily assets in the Raleigh-Durham market, to meet that rising demand for affordable housing as people continue to move to the area for increased job opportunities.

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Raleigh’s Exponential Job Growth

The Raleigh market was recently ranked by the Wall Street Journal as the 3rd hottest job market in the country – jumping up from #21 in the same list just a year ago. The thriving Raleigh economy is anchored in large part by Research Triangle Park, and job diversity throughout the area is high.

And it’s not just Raleigh but the entire state of North Carolina that continues to see exponential growth. North Carolina is expecting to grow its economy by more than $209 billion during the next few decades, with the arrival of 15 major businesses announced within the last year alone.

All that together spells off-the-charts job growth that will continue to attract people from all over the country and around the world to North Carolina, and to the Raleigh-Durham / Research Triangle area in particular.

The main driver behind that demand is Raleigh-Durham’s growth story — growing population, growing employment and a strong economy overall. The Research Triangle demonstrated incredible resiliency during the pandemic. Total employment is now in excess of pre-pandemic levels, and the market is enjoying a flurry of economic activity.

Total employment in Raleigh-Durham is expected to expand by nearly 38,000 jobs in 2021, which reflects an annual growth of 4 percent. Over the past two years, the Triangle has seen major expansion announcements from the likes of Apple, Google, Fujifilm Diosynth, and Eli Lilly, among others.

The area surrounding the Research Triangle Park (RTP) has also emerged as a node of activity as the research park continues to see targeted investment and development aimed at creating more of a live-work-play hub. The Greater Durham Chamber of Commerce reported $1.7 billion in private investment in Durham County in 2020 with projects located in and around RTP dominating that activity.

That additional investment will further contribute to the strong quality of life in the Raleigh-Durham area, and when paired with the wealth of job opportunities in the area, it will make the Raleigh metro irresistible to new residents, thus further driving up population growth and demand for housing.

Raleigh’s Rent Growth – No Signs of Slowing Down

The growing population in Raleigh is also spurring demand for housing in both multifamily and single-family settings. Robust renter demand for units is driving the local vacancy rate to new lows and pushing rents to all-time highs.

During the third quarter of 2021, absorption of apartment units totaled nearly 3,000 units, bringing the total for the first nine months of the year to approximately 7,900 units.

According to research from CoStar Group, occupancies are hovering at 95.3 percent with annual rent growth at a staggering 19.3 percent. Given the underlying demand and rent growth, it is no surprise that development activity is picking up.

The Raleigh-Durham multifamily market continues to experience unrelenting demand with record occupancy rates allowing operators to increase rents. Annual effective rent growth on a per square foot basis reached 19.1% in the first quarter.

Average rent growth in Class B assets reached 18.1% year-over-year, the largest escalation among all asset classes. Raleigh-Durham’s robust economic and population growth should keep investor demand strong in 2022 and beyond.

Rents in Raleigh have increased by 11% year-over-year.
Over the past 3 years, average rent for a 3-bedroom apartment in Raleigh increased by about 25%.
Renter-occupied households in Raleigh make up 49% of the total occupied housing units in the metropolitan area.

Given the astounding rent growth, together with the high ongoing demand for housing, we expect multifamily to be a strong investment in the Raleigh area for many years to come.

Why You Should Consider Investing in Raleigh, NC

As with any potential market, we always start by looking at the market fundamentals – namely job growth, population growth, and job diversity – as key indicators of the local economy and the potential for housing demand to remain strong and to continue to grow.

Over the last several years, the Raleigh market has consistently shown growth rates that are among the fastest in the country. That, paired with the high quality of living, the many large companies who are planning to move to or expand their operations in the area, and the abundance of job opportunities in the area, serve to attract more and more people to the area, thus driving up housing demand even further.

As the price of homes continues to rise in the Raleigh-Durham area, more residents are looking to the relative affordability of renting, particularly in class A and B multifamily communities with quality amenities.

Given all of that, investor interest in the Raleigh-Durham area is incredibly strong, and the Raleigh market is one of the most sought-after markets in the country for many investors.

If you’re looking for the hottest markets to invest in to build and diversify your portfolio, we highly recommend you look into Raleigh. And if you’re an accredited investor looking for passive investment opportunities, we invite you to invest alongside us via Goodegg Wealth Fund I – which includes hand-selected class A and B+ assets in Raleigh, as well as Tucson and Houston – offering built-in diversification in three high growth and recession resilient markets around the country.

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