North Carolina Real Estate Markets Expected to See Boost from Apple’s Proposed East Coast Headquarters
Apple’s announcement today that, as part of a broad expansion, it will build its first East Coast headquarters in North Carolina, comes in the wake of a series of similar moves by West Coast technology companies, including Amazon’s much-touted search a few years ago. These moves signal a public recognition that many of the cities which served as birthplaces for these companies have become victims of their success, by turning into high-cost unaffordable places for many young professionals. With many entrepreneurs and tech workers choosing to avoid expensive cities, especially in the new remote work reality, tech companies are moving to meet talent where they are. At the same time, these moves open the door to communities across the country to benefit from the continued growth of the tech sector. The democratization of economic benefits is a welcome benefit for many mid-sized cities.
Economic Diversity and Top Talent
North Carolina has been a clear winner of these shifts in the economy, and the Research Triangle has been a bright light for many years. Apple’s move recognizes the strength of the region’s academic institutions, as well as proximity to major employment centers along the East Coast. In addition, the combined Raleigh-Cary-Durham-Chapel Hill metro areas offer a dynamic blend of economic diversity, quality of life and, importantly, housing affordability. The cities benefit from balanced employment across the major industries— manufacturing, trade & transportation, professional & business services, education & health, leisure & hospitality—with unemployment rates trending below the national average.
While the announced 3,000 new jobs may not have an immediate impact on Raleigh’s 638,000-strong labor force, or Durham’s 321,000 nonfarm payroll base, these Apple jobs will be complemented by increased employment in service sectors, leading to a larger economic footprint. Apple will be joining an economic constellation of notable companies in the area, including Duke University and Duke Health Systems, the State of North Carolina, Wake County Public School System, Wal-Mart, University of North Carolina At Chapel Hill, WakeMed Health & Hospitals, North Carolina State University, Food Lion, Target Stores, and IBM, all of whom employ over 8,000 workers each in the region.
Real Estate Impact
The impact will be similar to the effect that Amazon’s choice of Northern Virginia had on the local economy and market. As my colleague, Nicolas Bedo detailed in 2019, “One year after Amazon selected Arlington, VA, as the site of its new HQ2, the impact on the housing market has been pronounced. Massive inventory shortages, sky-high price spikes and a blistering pace of sales are now the norm in the metro surrounding Amazon’s second headquarters, propelling it to one of the nation’s hottest housing markets.” However, that initial boost and frothiness moderated by the fall of 2020, with housing in Arlington, VA area becoming relatively more accessible. However, the area remains very competitive, in line with national trends over the past year, with inventory declining and prices rising at strong rates.
Looking at the Raleigh and Durham inventory landscape, we can expect the impact of the Apple announcement to also lead to expectations for additional growth, and likely short-term speculation. As of March 2021, both Raleigh and Durham-Chapel Hill experienced large double-digit declines in active inventory compared with 2020, of 70.3% and 60.4%, respectively. In addition, the number of new homes coming to market also dropped by 39.0% in Raleigh and 33.9% in the Durham metro area. Not surprisingly, listing prices—which hover above the national median in both metros—rose by 12.0% and 14.5% in Raleigh and Durham, respectively.
With housing markets which have been highly competitive this past year, Apple’s announcement is likely to add additional fuel to the demand pipeline. Additionally, in the wake of the COVID pandemic and with remote work expected to remain part of the employment environment in a hybrid model, the area has been a magnet for buyers looking to relocate from high-density, high-cost cities. In the first quarter of 2021, over a third of shoppers looking at homes in Raleigh were from out-of-state. Meanwhile, over 35% of home views in Durham-Chapel Hill came from outside North Carolina. And the out-of-state buyers in both metro areas hail from a who’s who list of expensive metros: New York, Atlanta, Washington, DC, Philadelphia, Chicago, Los Angeles, Miami, Seattle, Boston, and San Francisco.
Countering the strong demand wave, the North Carolina metros have been ramping the supply pipeline. In March of this year, there were a total of 3,136 housing units authorized in Durham-Chapel Hill and Raleigh-Cary, bringing the total for the first quarter to 7,707 units, most of them single-family homes. While this is good news for today’s buyers, given the rising cost of construction materials and the building cycle, real estate markets will remain competitive for the balance of 2021.
For the medium-term horizon, North Carolina will continue to be an attractive magnet for companies, workers and retirees alike. The state’s geography, natural attractions, quality of life, and affordable cost of living will continue to be strengths. At the same time, for many long-time residents, the growth in prices will continue to have a spillover effect, shining a brighter spotlight on smaller communities. This year, Burlington, NC, made our Top 20 Hottest Markets list in March. With a median price of $302,000, Burlington offers more for a buyer’s budget, while being only 35 miles from Durham and an hour’s drive from Raleigh. Similarly, housing markets in neighboring Greensboro, as well as Winston-Salem are likely to see solid demand.