“We have begun to experience headwinds from [the tightening] of monetary policy to combat inflation,” he says of rising federal interest rates. “As a result, lending has slowed considerably and many high-profile projects are being delayed.”

That uncertainty is being reflected in office, high-rise multifamily, mixed-use and most speculative developments, he says. Yet there are still bright spots. “Most speculative development projects that rely on private equity investment have been put on hold as lenders wait on the sidelines for economic conditions to improve,” he says. “This has impacted the previously hot speculative market.”

Sectors that don’t rely on private funding are continuing to build at a good clip, Cooper says, with health care, life science, institutional, education, multifamily, infrastructure and manufacturing market sectors all remaining strong.

Supply chain disruptions from the COVID-19 pandemic and resulting cost escalation and material lead time delays have led to a few “wonky” years, he says, but much of that escalation has subsided in the Raleigh market, where Brasfield & Gorrie is starting to see a reluctance in lending due to higher interest rates and uncertainty in several core markets.

There has also been a slowdown in tenant work while companies grapple with work-from-home arrangements, Cooper says. The result has been decreasing office expansions and relocations which, in turn, has decreased demand for ground-up developments. Along with the hesitation of lenders, the trend has slowed Raleigh’s urban core development, at least temporarily.

Large development projects are being conceived in Raleigh that are set to transform the downtown environment when completed, Cooper says. Aiding that is a push to raise permitted building heights to increase density downtown, like an expansion to the convention center, new downtown hotels, a consolidation of city offices into the new Civic Tower and a revitalization of Dorothea Dix Park.

“Altogether, these projects are like dry powder—as soon as economic conditions improve, even slightly, Raleigh is waiting to explode with even more growth,” Cooper says.

But Raleigh has positioned itself as a prime relocation destination, he adds, specifically in the science and technology market sector which has seen significant growth in recent years as companies based in the Northeast or on the West Coast look to relocate or expand in the region.

“Although a portion of Raleigh’s development is in a sort of ‘rain delay,’ Raleigh’s strong job market and surging population has it poised to weather the storm quite well, and we fully expect construction to accelerate once the macroeconomic clouds clear,” Cooper says.

Dodge Data & Analytics forecasts overall construction activity in the Raleigh market to bounce back in a big way in 2024, with an expected $8.1 billion in starts, compared with 2022’s $7.8 billion and 2023’s $7.3 billion.

Brasfield & Gorrie, for one, is keeping busy in Raleigh with recent projects in health care, multifamily, mixed-use and other projects, including the 97-acre Spark LS life science campus in Morrisville. The project includes the construction of 373,000 sq ft of biomanufacturing buildings, 155,000 sq ft of research and development lab space and multiple amenity buildings. The first spaces are set to begin turnover late this year.

In West Raleigh, the firm is also constructing a new headquarters for technology and communication services company Bandwidth, including a five-story, 500,000-sq-ft office building and five-story, 1,859-space precast parking deck as well as an amphitheater, Olympic-sized soccer field, barn space and Montessori school.

Looking to the next year or so, Cooper expects inflation to continue to inch downward, causing interest rate cuts to follow. If that does happen, Brasfield & Gorrie expects to see lending for construction projects to pick up steam.

“Combined with much lower material escalation trends, Raleigh, as well as the greater Triangle area, is well positioned to rebound quickly in the next year,” he says. “Our job market is strong, we are still seeing significant population growth and the business climate in North Carolina is very friendly.”