Downtown Raleigh’s newest developments include large courtyards perfect for outdoor dining and socializing, but they’re eerily empty — for now.
The mixed-use high-rise buildings that finished construction this year were planned well before the pandemic. Long before downtown employers told staffers to work from home. Long before violent protests left behind boarded-up windows and damaged storefronts.
Collectively, the developments are adding nearly 100,000 square feet of street-level retail and restaurant space. They’re looking for tenants at a time when the downtown retail and dining scene is still in recovery mode and a number of vacant spaces remain where a business closed during the pandemic.
Leasing agents responsible for filling the new storefronts say interest from new businesses has increased dramatically in recent months, making them optimistic that many of the newly built spaces will come to life sometime next year.
“There’s been more robust leasing in the second half of this year than has ever occurred,” says Charlie Coyne, a senior vice president with CBRE, which leases retail space at multiple downtown properties. “It’s really a bet that downtown Raleigh will be fully reoccupied” as office workers return in the coming months.
It will take months for the leases under negotiation to lead to business openings. Back when the newest buildings were planned, developers assumed that a fast-growing downtown would quickly make them the new hotspots.
Downtown boosters hope the pandemic challenges are ultimately just a speed bump in more than a decade of massive growth. Since 2015, developers have built or planned more than $4.9 billion in residential, office and retail projects, according to the Downtown Raleigh Alliance. That has led to more than 12,000 downtown residents, 3.5 million square feet of new office space, and 732,000 square feet of new retail and restaurant space.
Smoky Hollow is Kane Realty’s massive complex of apartments, offices and retail space, anchored by a Publix grocery store where Peace Street meets Capital Boulevard. It can house as many as 20 retail storefronts totaling 40,000 square feet, surrounding a central courtyard known as The Hollow.
The construction barricades came down in April, and while five businesses signed leases — most notably the popular Charlotte barbecue restaurant Midwood Smokehouse — most aren’t expected to open until this spring.
▲ Kane Realty’s Smoky Hollow development won’t open many of its retail and restaurant spaces until 2022, even though the
buildings were completed in 2021.
The Hollow’s outdoor space has hosted a few special events such as a craft market, but most of the time it’s quiet. “If this was opened two years ago, it would not look like what it looks like now,” says Stacey Buescher, managing director of operations for Kane.
Some openings have been delayed by construction supply-chain issues and labor shortages. About two-thirds of the property is still seeking tenants, while Buescher says four more leases are under negotiation.
In addition to Midwood, the current line-up includes Milk Lab, a bubble tea and rolled ice cream shop; Dos Yoga, a yoga studio and smoothie bar; the Madre tapas restaurant and cocktail bar; and J. Lights, a coffee, sandwich and cocktail cafe.
“Our investor has been open to us taking time on this to make it right,” Buescher says, adding that the focus is on local businesses rather than chains. She expects most tenants will be restaurants, bars and service businesses such as salons and fitness studios, as demand for soft-goods retailers remains low.
A few blocks south of Smoky Hollow at the corner of Glenwood Avenue and Hillsborough Street, the Bloc[83] development has a similar courtyard set-up for its 45,000 square feet of storefront space. The second phase of the development, known as Tower Two, opened in April.
No tenants had been announced by mid-November for Tower Two’s ground floor. A large TV screen and piped-in music in the courtyard plays to no one. In the first phase of Bloc[83], the One Glenwood office building, the cocktail bar Dram & Draught held on through the pandemic by selling groceries. An Australian burrito chain next door closed.
Coyne, whose company handles leasing for Bloc[83], expects several new tenants will be announced by Jan. 1. He’s bullish on retail and dining prospects in downtown’s newest developments, noting some downtown businesses will relocate to take advantage of the courtyard setup. “It’s new space, where you’re going to get a bigger patio,” he says.
The COVID-fueled shift toward more outdoor dining could hurt demand for spaces in other downtown buildings where seating is limited to a portion of the sidewalk, such as Fayetteville Street. Two restaurant spaces in the Charter Square building near City Plaza have been vacant for more than a year, as has a former Italian restaurant in the Duke Energy building and the former Pizza La Stella in the city-owned Exchange Plaza building.
While food and beverage sales in the Fayetteville Street district are improving, they were still at 68% of pre-pandemic levels this fall, according to the Downtown Raleigh Alliance. The absence of many office workers is a key factor, but Coyne says he hears that most will be back in person in early 2022.
“Retail and restaurant [owners] feel comfortable that the office reoccupancy will happen,” he says.
In the third quarter of 2021, the Downtown Raleigh Alliance reported 14 storefront business openings and four closings. Several of the newcomers filled existing spaces where a business closed during the pandemic. Union Special bakery is in the former Tama Tea on Fayetteville Street and (ish) delicatessen is in the former Pharmacy Cafe on Person Street.
The closings included two art galleries and two restaurants. From January 2021 though the end of September, downtown had 48 new storefront openings or expansions, up 71% from the same period in 2020.
If that momentum continues, the scene at the new courtyards at Smoky Hollow and Bloc[83] could look a lot different a year from now. By that point, retail leasing agents hope to be working on the next several mixed-use projects that are under construction now. ■
