Durham, North Carolina
There are Lots of Reasons to be Bullish on the “Bull City”
By Carole VanSickle Ellis
When Google announced in March 2021 that it would create its next “engineering hub” in Durham, North Carolina, many investors in the area were not particularly surprised. After all, Durham, also known as the “Bull City” due to the longstanding presence of Bull Durham Tobacco, the first nationally marketed tobacco brand in the United States, is better known today for its place as one of the vertices of North Carolina’s vaulted “Research Triangle” thanks to the presence of Duke University, Duke University Hospital, and North Carolina Central University.
“We are fortunate…because we have a longstanding relationship with Google in many facets of their business,” observed Greg Victory, executive director at the Duke Career Center.
Durham mayor Steve Schewel chimed in, noting smugly, “I would say, ‘Welcome, Google,’ but Google already has a strong presence in Durham.”
Local real estate developer Jessica Brock summed up local sentiment, observing “What is most important is that they are here, and they are in our community, and they are going to be hiring our talent and making this one of their major hubs.”
Google itself promised the new center would create about 1,000 jobs for the area and cited Durham’s “best and brightest engineers in the world” as one of the primary reasons the company selected the city for the hub. Google sublet space from Duke University in downtown Durham and began moving people and equipment into the city in May 2021.
Just 18 months later, the company announced it would be expanding its downtown footprint and debuted a program designed to certify teachers in the use of Google digital tools designed to “support student learning, better manage coursework, and improve student outcomes.”
For real estate investors, this type of economic development and expansion is simply par for the course in Durham. Even in the midst of COVID-19-related shutdowns in April 2020, the city focused on growth. In fact, Durham County supported the creation of 14 economic development projects and 6,900 new jobs in the area starting that very month. The issue moving forward would be one that investors definitely can help resolve: a lack of available housing.
“Durham is going to see heavy population growth over the next decade, and the relatively young population is helping drive demand for rented houses and property purchases,” observed Norada Real Estate Investments CEO Marco Santarelli.
He added that the “limited inventory and strong demand” has already led to increases in home prices in Durham and called the city “one of the fastest-growing communities in the nation, [which could] indicate the city’s future real estate investment potential.”
A Natural Hot Spot in the Triangle Region
The Research Triangle, also known as “The Triangle,” is the nickname for the area of North Carolina anchored by the cities of Raleigh, Durham, and Chapel Hill (see graphic on p.44). Although some definitions place as many as 16 counties in the extended Triangle area, the core counties are Wake, Durham, and Orange. The city of Durham, North Carolina, is located in Wake and Durham Counties.
Durham itself is home to Research Triangle Park (RTP), which was created at the behest of Duke University, the University of North Carolina in Chapel Hill, and North Carolina State University in the 1950s when the institutions encouraged the state legislature to purchase a large tract of land in Durham County and set up a “science park.”
Today, RTP is among the most prominent high-tech research and development parks in the country, in large part thanks to its early inception and a steady flow of highly trained in-state graduates.
The influx of well-paid science professionals into the RTP area has affected housing affordability for decades, but 2022 brought some of the worst metrics in this regard that the area has seen. However, local professionals reported in July that buyers who are “ready, willing, and able to make an offer on a property” may find themselves in a position to pay a little below asking price and, as one broker put it, “get a few dollars or a little closing cost help” in the bargain as the market cools.
Wake County properties tend to be relatively more affordable than Durham County properties, with Wake homes posting median sales prices around $317,000 compared to Durham’s $426,000.
For investors, a fast, convenient sale could be the key to getting deals done with sellers afraid of missing the last gasps of the housing boom in the Triangle area. For homeowners accustomed to seeing bidding wars with more than a dozen participants, today’s “slowdown” could indicate that buyers might soon have the upper hand – however unlikely that scenario may actually be. Offering to acquire properties as-is, for cash, or with a short window for closing could be the key to success.
“Overpopulation” Means Something Different in Durham
In most growing tech hubs, the term overpopulation has more to do with how many new households are forming and how short on housing units the market may be. However, in Durham, some real estate professionals are using it to describe the population of real estate agents and other real estate professionals in the local market. In March of this year, there were roughly 2,000 listings in the Durham market and 13,500 realtors active in the area according to the Durham Regional Association of Realtors (DRAR).
According to Shawn Hays, DRAR president, the hot market and the pandemic both contributed to the influx of active realtors and agents. “More people have had time to get their license because the education has changed to online from in-person. It became more accessible,” he explained.
Local North Carolina State University economist Mike Walden observed at the time, “The labor market in any area will seek its own balance…[but] it is probably going to be over-populated with agents this year.” As of the start of Q3 2022, there were just under 800 listings in the area (down 3.9% month-over-month according to Rocket Homes). The number of agents had not been officially updated but, by comparison, in 2020 there were just over 4,600.
The Durham market is crowded with buying and selling options thanks to non-agent and non-human elements as well. OpenDoor, one of the country’s biggest digital platforms for residential real estate that recently settled with the Federal Trade Commission (FTC) for $62 million over allegedly “deceptive advertising” (OpenDoor settled but continues to deny the allegations), is particularly active in the Durham area. In fact, it is the largest iBuyer in the region and is one of the largest corporate owners of single-family detached homes in North Carolina. The North Carolina Real Estate Commission (NCREC) actually suspended OpenDoor’s license for several months earlier this year, but stayed the suspension shortly after issuing it.
Some local professionals say i-buying is likely to decline in popularity as the housing market levels off, while others say sellers will still be highly motivated by convenience. Either way, real estate investors will be able to edge out competition by offering convenience, a higher-value offer via traditional or creative financing, or both. Since Q2 2020, investor activity in Durham has risen steadily from 11.3% of all transactions in the second quarter of 2020 to more than 20% at the end of 2021.
A “Super-Charged,” Recession-Resistant Local Economy
Durham is located in a prime economic position geographically as one of the “vertices” of North Carolina’s “Research Triangle” and in a state considered by many to be “ahead of the nation” economically. Midyear 2022, Business Facilities Magazine and CBC both ranked North Carolina first in the country for business climate. Around the same time, Moody’s director of economic research Dante DeAntonio called the state “way ahead of the nation [economically]” and added, “North Carolina is holding up incredibly well” in terms of remaining insulated from the COVID-19 pandemic and economic recession.
Durham, in particular, is expecting to bring in thousands of new jobs by the end of the year, and locals employed in professional and business services, leisure and hospitality, and healthcare sectors report having many options in these fields. The Durham healthcare sector posted substantial job gains in ambulatory healthcare services, hospitals, nursing, and residential care facilities. These jobs are good for population growth because they bring in employees with recession-resistant (some would argue recession-proof) jobs and paychecks seeking mid-level workforce housing.
University of North Carolina (UNC) Kenan Institute of Private Enterprise chief economist Gerald Cohen observed, “The Triangle area is an area where you are seeing a lot of job creation, a lot of people moving into the area. So, even if there is a recession…it could be that the Triangle area would not necessarily have declining growth.” Cohen concluded, “This data just says that the Triangle economy…will remain supercharged.”
SIDEBAR 1
New & Expanding Companies in the Durham Area
In 2021, seven major tech, biotech, and medical tech companies announced they would move to Durham or expand their presence in the city. Those companies were:
Adverum Biotechnologies
» new presence
» 200 new jobs
» $82 million capital investment
Biogen
» expansion
» 90 new jobs
» $200 million capital investment
CARsgen Therapeutics
» new
» $157 million capital investment
» 200 new jobs
Fidelity Investments
» expansion on
three fronts
» 2,225 new jobs
» new
» 1,000 new jobs
Jaguar Gene Therapy
» new
» $125.4 million
capital investment
» 250 new jobs
Smart Wires
» new
» $23.5 million capital investment
» 250 new jobs
In 2022, the total number of incoming companies is not yet confirmed thanks to a thriving local startup community and ongoing negotiations with major firms. However, a partial list includes:
Amazon
» new
» “hundreds of jobs”
Apple
» new Campus & East Coast Headquarters
» $1 billion capital investment
» 3,000 jobs
Meta
Facebook parent company)
» “significant presence”
» no hard numbers
Microsoft
» expansion
» ~500 area jobs
SIDEBAR 2
“Where Will All These People Live?”
With such a vibrant economy and constantly growing local population, the question on many economists’ minds when it comes to Durham, North Carolina, is simple: “Where will all these people live?” Ryan Tegan, vice president of economic development at the Greater Durham Chamber of Commerce, called “the availability and affordability of housing” a “continuing and critical factor in supporting our economic growth.” Regan told TechWire earlier this year that the city issued a $95 million affordable housing bond designed to incentivize public and private partners to “build and preserve thousands of affordable housing units in coming years for Durham residents.”
One ongoing public/private partnership that serves as a prime example of a successful initiative to create more housing in the area is the HUB RTP development, a $2 billion development designed to bring in commercial real estate developers with “the same kind of vision [as] in the 1950s and 1960s when RTP was founded,” as Research Triangle Foundation president and CEO Scott Levitan described it.
“The Hub” is intended to be a mixed-use development blending retail, life science, residential, and business space in a way that will add value, appeal, and housing in the RTP area. The project currently includes 1,200 new apartment units and, upon completion, will mark the first time in the history of RTP that people can live in the park.
Although this will not resolve the housing shortage entirely on its own, locals hope a successful project will pave the way for similar projects elsewhere in the region.
