But empty retail spaces for years pay no rent, so that doesn’t seem helpful. It’s like being unemployed for 7 years to hold out for that high-paying management position.
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EXACTLY, like damn y’all - even if they charged $100/mo for retail rent, it’d be leased out INSTANTLY. And wouldn’t an instant $100/mo be better than $ZERO.00 for months and months on end???
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It’s the only viable option for most developers, they can’t afford to lower the rate because they will have to pay the difference in valuation in cash to the bank. When they have vacancies, they can typically move part of what they owe to the end of the mortgage (+ interest). The full article is really worth reading. Relevant quote:
Option 3. Ride it Out. The developer keeps making their loan payment with three of seven units vacant. It’s not ideal, but it’s stable. Refinancing time comes and the developer can assert – and the bank can verify – that the market rate in that building is $10,000 per year.
Yes, there are three vacancies and they’re making an effort to fill them, but they will be filled at the $10,000 rate like the four that are currently leased. Please, banker, continue to value the building at $1 million so we can roll this loan over and wait for the market to improve. In the business, this is called “extend and pretend.”
Here’s where the incentives for the bankers get interesting. If this is a local bank financing a local commercial product, the conversation probably gets rather personal. That local banker knows the local market and has a sense of what kinds of rents are possible. They are taking depositors’ money—literally the money of their neighbors—and investing it in this commercial enterprise. Hard questions are asked and whatever is finally agreed upon, we can guarantee the developer has a disproportionate amount of skin in the game.
Unfortunately, that’s not how banking works today…So, if the banker can legitimately certify that leases are in place to justify a $1 million valuation, that vacancies are only temporary, and that there’s a good faith effort underway to fill them at rates that justify the loan, then it’s all good. Extend and pretend.
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Nice.
Redevelop all of Heritage Park with buildings of this scale. This is about 250 units per acre? That would make for 2500-3000 units.
500 units 30% AMI (4x Heritage park), 500 units 30-80%, 500 units 80-120% workforce, and 1500 units luxury market rate.
If RHA could use their 12-acre property as their equity contribution to a development, and the City funds the infrastructure (road reconfiguration) through a bond isssue or some such, I bet they could make something like that happen.
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It’s a lot easier to combine a series of larger format spaces into giant ones than it is to carve it into smaller format pieces. Devlopers need to provide more opportunity for smaller format parcels.
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Cabarrus looks activated, but I’m not sure there’s much that can be done with the Dawson frontage considering the grade change, railroad, and Red Hat across the street.
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To be fair, that article is about office space rather than retail space. Even with retail moving more and more online, growing urban neighborhoods still need services that can’t be bought on Amazon, but those businesses typically don’t need huge amounts of space.
Tailors, shoe repair, barber shops, bodegas, second hand/vintage stores, locksmiths, coffee shops, local gifts, galleries, frame shops, bakeries, shipping stores, cleaners, nail spas, optometrists, dentists, etc. are things we have and need more of downtown as the population grows.
Frankly, with hybrid working here to stay (especially in tech), Raleigh is lucky to have its downtown not heavily invested in office towers. I’m good with continuing to pump more and more residents into the city center so that retail and services will grow, instead of just bars and restaurants.
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The article applies to commercial real estate that’s already built. For new developments, I agree that developers need to be smarter about the market and the demand for smaller spaces.
I mostly wanted to push back against the idea that developers are able to just “lower the rent” for commercial real estate without paying a huge fee or crashing the commercial real estate market.
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TBJ just dropped! https://www.bizjournals.com/triangle/news/2022/05/18/downtown-raleigh-apartments-condos-development.html (updated link: had the wrong one there at first 
)
Pertinent details:
Plans have been submitted to the city calling for a 12-story building with 261 units. Taft Family Ventures of Greenville, which bought three parcels off West Cabarrus and South Dawson streets in 2019 for $5.1 million, has now put forth a site plan to the city.
JDavis Architects of Raleigh drew the plans for what is being called Cabarrus & Dawson Residences. The 1.18-acre property is zoned for downtown mixed-use with up to 12 stories – and the full 12 stories is what the plans show.
In 2019, officials planned for 184 residential units, but that number has increased by about 30 percent with the top 11 floors being used for residences. Plans are now for 193 one-bedroom units and 68 two-bedroom units. The site plan shows retail usage on the ground floor on both Cabarrus and Dawson Streets.
The new building would be 286,775 square feet with a 255-space parking garage. Plans feature a pool on the third floor.
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Snooze to look at, but wow that’s a ton of residential units getting dropped into DTR. Love it!
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Decent use for the funny shaped lot too. Overall a win.
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Glad to see they have retail on both Cabarrus and Dawson. @OakCityKarla and I were just conceptualizing this the other day from our patio and I’m more in favor of it now than I was before. I think 12 floors here is great use of the awkward lot.
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Free concerts for all the residents on 2 sides of the building! This will make a much nicer backdrop for people in the amphitheater than the nothing there now too.
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3 different color-clashing materials for the facade - confirmed LMAO
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"Ok guys, our budget isn’t allowing us to use the really high-end cladding materials. Should we…
a) keep it simple and classic and really try to nail the proportions and details or
b) make it looks like a bored 5th grader’s school collage project?"
“B! B! B!”
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Next, copy-paste this 10 times at Heritage Park.
This project: 1.18 acres
Heritage Park: 11.6 acres
With a similar unit configuration that’s 2610 units.
You’d probably want to include some 3-bed and 4-bed units in a replacement for HP so families can live there, so the unit count would be lower than that. Say… 2500 units?
Make it so.
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Now we’re talking.
I know we’ve beat this dead by now but it’s so crucial to get Heritage Park right.
That many residences with hopefully a high affordability % walking distance to a school, Dix, and everything downtown has to offer would be massive. Anything less is a huge swing and miss.
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Soil drilling machine was busy on this site today
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Did you actually see the drilling rig or just the trucks that said blah blah drilling on the side? I ask because I saw those trucks, not the actual drilling rig and associated it to the rig that’s over at the Capital Sq 320 W. South St. still drilling blast holes for those rocks.
It was this identical machine from your picture at Capital Square. It was also in use by 3 workers, I was just driving too fast down Dawson trying to make the turn at Lenior to get a picture.
I’ll try and get a picture this afternoon
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