9/8/22 Raleigh Mastermind Group Meeting

Raleigh September 2022 Key Take Aways

 RPN Guest John Paul Dolan is with RS&H; his focus is Higher Ed, Science & Tech, and Corporate Commercial; he has been in NC 38 years. He’s worked with Wake Tech RTP Campus, Duke Lab, Red Hat, Lenovo and NC State.
 CE Group’s Mark Ashness said Moncure area is active. Multifamily and mixed-used development are strong across the Triangle.
 Andrew Moriarty of Bohler Engineering said he’s active in industrial (warehouse, cold storage, and data centers), specifically on the I-85 Corridor. Multifamily is growing in outlying areas, like Johnson, Granville and Lee Counties. There’s no abatement on availability or cost of materials, minus lumber. Mark Fletcher added labor continues to migrate into the Carolinas; he thinks it will raise market.
 Whiting Turner’s Robert Tomlinson said costs are escalating at 1% per month; he sees impacts of procurements; and labor is a challenge. Some projects are scaling back to meet budget.
 SINGH’s Development Mony Grewal said the firm will start two Cary multifamily projects and Morrisville Town Center in 2022. She sees financing as a big challenge, not just due to material costs, but also rates. She said debt service restraints could restrict firm growth.
 John Daly with Marcus & Millichap said multifamily activity has slowed due to gap in sellers’ and buyers’ expectations. Sellers unrealistically expect low cap rates. However, demand is strong; capital is chasing deals. Buyers are being patient.
 TradeMark Properties’ Sandra Simpson is working on a potential downtown Raleigh Life Sciences project on Block 83 with Wilson Blount Development. She has 10 acres on the 2700 block of Wilmington St.; property is not subject to rezoning.
 Marlene Spritzer with Lee & Associates reported 7M SF of Life Sciences is in the area, with 7M proposed or in pipeline. For manufacturing, she sees companies in Lee, Chatham, Johnson, and Alamance Counties. Area Life Sciences includes gene therapy, vaccine, ag bio, and biodefense. She sees growth in tech sector. Biotech Center awarded $25M from Build Back Better federal program.
 Lee & Associates’ Scott Hadley said large industrial investors do not look at this as a core market. COVID grants did not go to infrastructure in industrial parks.
 RPN Member Matt Martin with the Federal Reserve Bank of Richmond presented “Some Signs of Slowing” in today’s meeting. The Federal Reserve is the central banking system with 12 head offices and 24 branches. His job is to engage regional business and banking communities to secure a grassroots view.
 The labor market is strong; output growth is slowing although NC and Raleigh are faring better than US; and inflation is elevated.
 Community prices and rent growth may have peaked but seeing little pass through to consumer pricing. He thinks we’ll experience a mild recession nationally, and inflation will be problematic.
 Matt identified signs of strength as strong job growth; job openings remain elevated; labor force participation is recovering; and nominal wage growth is accelerating broadly (but not keeping up with inflation). Final sales look better than GDP. Business spending was weakest in Q2 2022; consumer spending growth was below trend, but not weak.
 New home sales are declining; new and existing housing market is softening nationally. Used car prices are starting to fall (almost 4%). Inflation has broadened with elevated services inflation. Energy prices have come back in; goods prices have reduced. Until service sector abates, Matt does not believe inflation will reside. Commodity prices should eventually provide relief. Europe is going into recession, based on energy costs.
 Regional trends: NC has done well, driven by Charlotte and Raleigh, but there’s variation across the state. Hospitality and government remain below pre-COVID levels.