By Brandee Gruener
Amos Cooper Jr. would like to stop operating his concierge service, Bull City Butler, out of the guest bedroom in his home. He is looking to buy commercial property that is large enough that he can hire a couple of people, expand his business and possibly rent to a retail tenant. Travel plans and corporate events dried up during the pandemic, and the slowdown in business gave him time to think about the importance of diversifying his income.
Cooper began talking with Partners in Equity, an investment group “committed to increasing the number of Black- and brown-owned businesses that own the real estate where their companies operate.” He discovered that buying a commercial property was more attainable than he’d thought. And with companies like Google, Apple and a number of life sciences companies announcing they will add thousands of employees to the area, now seemed like the moment.
“There’s going to be a huge influx of people over the next few years who are going to be moving to this area, and they are looking for things to do, places to go,” Cooper said. “It’s a good time to get in now if you’re going to do it.”
And while commercial real estate looks nothing like the insanely hot residential real estate market in Durham, that dynamic could change.
“At some point, you know, in the next two years, I have a feeling that things are going to be pricing out a whole lot of people very quickly,” he said.
Businesses Wonder How Google Move Will Affect Downtown
Cooper is looking in and around downtown, where rents have sprung up alongside new buildings and redevelopments. That’s why he decided ownership would be the more economical approach to moving into an office.
One of his neighbors would be Google, which announced plans in March to open a new cloud engineering hub in Durham.ID. It could take up to two years to build out the space at 200 Morris St., but the company expects to hire 150 employees by the end of the year. The cloud engineering hub is projected to have 500 employees by 2023 and could eventually reach 1,000.
Alva Horton is the community manager of Locale 321, which rents 19 private offices on East Chapel Hill Street to remote workers and others who need an office outside of their homes. Horton expects that demand for coworking spaces will increase as Google employees and their spouses move to the area. Demand already went up because of the challenges of buying a new home with adequate home office space during the pandemic.
But while Horton said they have talked about expanding Locale 321 in the past, it would have to be “the right sort of space” to fit their Durham-centric coworking community. Horton’s own marketing company, The Assemblage Studio, is one of the tenants.
“We don’t want to grow so big that we lose that,” she said. “It’s really important to us that it is that community space.”
Horton said she doesn’t worry about the availability of commercial real estate right now, but she would like to see downtown preserve its character and its homegrown businesses.
“I love those local spaces so much,” she said. “I would be concerned that there would be some larger corporate retail and restaurants that would come in, that would buy up those spaces. I’d like to see more local businesses do that.”
When asked about the potential impact of Google’s arrival on small business owners, Lilyn Hester, head of external affairs for the Southeast, provided a list of Google’s community efforts in Durham and beyond. For instance, Google made a $180 million commitment to a nationwide small business fund and nonprofit grants program. The fund delivers low-interest loans to community financial institutions like Self-Help Credit Union. Google also invested $175 million toward economic opportunity for Black business owners, including a $5 million Google for Startups Black Founders Fund. Google for Startups has partnered with American Underground on a Black Founders Exchange program for five years.
Hester said that Google chose Durham for this cloud engineering site because of its proximity to three research universities and because it “aligns with our focus on research, scientific discovery, technological advancement and our goal to attract underrepresented talent.” And Google is not alone.
Meet Durham’s Google Engineering Site Lead
Kamala Subramaniam is responsible for growing Google Cloud’s presence in the state and building an ecosystem of academia, the industry and the local communities. Subramaniam will focus on research, scientific discovery and technological advancement, all with a focus on diversity and inclusion.
Subramaniam, who has both a master’s and doctorate in computer engineering from N.C. State and serves on the university’s Computer Science Strategic Advisory Board, began her career at Google in 2016 in the Bay Area. Her experience is in building strongly performant engineering teams that work on large-scale distributed systems that are geographically distributed. She is also the diversity and inclusion leader for Google Networking.
Talent Draws Outside Money Into Durham
Real estate brokers say that talent – along with affordability and quality of life – is what continues to attract out-of-state investors to Durham and Research Triangle Park. As more companies arrive, they draw in even more talent, which further feeds the cycle of growth.
“We were already a vibrant economy as it was, and growing in the life sciences arena,” said Emilee Collins, a Realtor and commercial broker with Pickett Sprouse Commercial Real Estate. She said that while office vacancies rose during the pandemic, industrial and flex space continued to be in high demand. And many brokers believe that the need for office space will continue as workers return, even if they aren’t there on a daily basis. Other companies are expected to follow in the footsteps of Google and Apple, with many needing leases in the short-term while they custom-build their own spaces.
“It’s definitely an exciting time for our area,” she said, “but there will be challenges with the growth and keeping up with infrastructure needs that are inevitable because of the growth.” There could be challenges for local investors, too.
“I think with the announcements, we are going to see rent increases and purchase price increases in all of those spaces in this geography,” Collins said. “It will most likely price a lot of our local businesses out of the market in the long term.”
Mark Alviano, the director of investment sales for Trinity Partners, said locals already experience sticker shock when shopping around because they remember what real estate cost 10 years ago.
“They are thinking, ‘Boy, this market is continuing to accelerate, and I better get my piece of the pie while I can,’” he said. “But they’re finding that it’s more competitive than it ever has been due to outside money. My message is, ‘Why wait?’”
Alviano said that announcements by companies with the cache of Google and Apple bring a lot of attention to the market, which results in an“acceleration of what’s already happening here in the Triangle.”
“We’re not anticipating a decline in value,” he said. “We may slow our pace of growth at some point in the future, but it would not seem we are going to fall off a cliff like a stock market might.”
Alviano said that local investors can still find opportunities in North and South Durham, which he believes will benefit from the growth in the center of town. Brokers also point local investors toward markets like Sanford, Pittsboro, Apex and Burlington.
“There’s room for everybody,” he said, but “from an investment property market standpoint, we continue to experience an abundance of investors interested in our market as compared to limited availability of product to purchase.”
Logjam in Residential Real Estate Continues
Debra Mangum, a Realtor and residential broker for West & Woodall Real Estate, can’t picture when that cycle will end in home buying. In May, housing inventory was down by 67% in Durham compared to a year prior, according to the Durham Regional Association of Realtors. Meanwhile, prices were up 18% in the city and 24% in the county. Mangum’s average sales prices used to be around $275,000 or $300,000. Now she estimates the average falls between $400,000 and $500,000.
“Most times we’re seeing or receiving multiple cash offers within hours,” Mangum said. “We’re seeing sight-unseen offers, which is just crazy to me, because I need to smell a house.”
Mangum said this is a great time to sell a home, but many people have nowhere to go. And the competition from buyers – not to mention those who are coming from out-of-state and have deeper pockets – is incredibly fierce. That trend is likely to continue with the arrival of workers from Google, Apple and other companies. Mangum hopes the market will begin to loosen up in the fall, a result of people abandoning the search and moving into rentals. She really wants to help those first- time homebuyers who have saved their pennies.
“I have people dropping out of the market all the time because they’ve pushed and pushed their limit as high as they’re comfortable with, and we’re seeing that they’re getting less and less value for their money,” she said. “Their salaries haven’t spiked like the people who are coming into the area, so they just are kind of taking a break.”