Housing Density May Be Driving Retail Expansion in North Carolina’s Research Triangle

Retail development in North Carolina’s thriving and rapidly expanding Research Triangle is increasingly gravitating toward areas with higher housing density rather than just following high household incomes, according to a new CBRE study.

The study examined North Carolina’s I-40 corridor from Durham in the north to Raleigh, where incomes have been growing rapidly due to a combination of a highly educated workforce, institutions of higher education, and a wave of private investment.

The research team divided the Raleigh and Durham region into several dozen two-mile clusters and found that, despite the prevalence of high median household incomes in the area, retail investors have largely avoided these clusters. Instead, they have chosen denser clusters with lower median household incomes.

“North of Raleigh and the new I-540 beltway is a swath of sprawling high-income neighborhoods,” CBRE said. “However, the population there is not yet dense enough to support substantial retail development. In fact, there are very few shopping centers in this area, including those built before 2000. This could be a consequence of fewer rooftops, zoning, or both.”

CBRE found that a similar trend has developed southwest of Raleigh, where a boom in population and housing construction has led to new retail center developments.

A report from Axios found that the percentage of households earning more than $100,000 per year in the Research Triangle increased from 39% in 2019 to 2022, despite the median household income in the country contracting by 1.6%.

CBRE found that the retail vacancy rate in the second quarter of the year decreased by 70 basis points year-over-year to 5.1%, as net absorption for the quarter reached 323,760 square feet. The market report also noted that 85% of more than 682,000 square feet of retail space under construction has already been leased. New retail construction has been subdued despite strong fundamentals, the report said, but the space under construction is located in mixed-use, walkable environments like downtown Raleigh, central Durham, and suburban neighborhoods with rapidly growing density.