Raleigh-Durham commercial land: what we acquire in Wake County

A good deal of older commercial land in Raleigh and Wake County is still improved with single-story retail, low-rise office, flex buildings and surface parking. Raleigh's Unified Development Ordinance (UDO) has no stand-alone commercial or office district: Sec. 1.3.1 establishes residential, mixed-use and special districts, and the use table in Sec. 6.1.4 allows office and retail uses mainly in the mixed-use districts, most of which also permit apartments. Where the zoning allows considerably more than what stands on the ground, the land carries value the current improvements do not reflect.

That gap is what we look for. We underwrite the land, not the building on it, and we close on our own capital.

Our criteria are indicative, and every site is underwritten on its own terms. In general we look for:

Raleigh's UDO establishes seven mixed-use districts in Sec. 1.3.1: Residential Mixed Use (RX-), Office Park (OP-), Office Mixed Use (OX-), Neighborhood Mixed Use (NX-), Commercial Mixed Use (CX-), Downtown Mixed Use (DX-) and Industrial Mixed Use (IX-). Under the Allowed Principal Use Table in Sec. 6.1.4, multi-unit living is permitted in RX-, OX-, NX-, CX- and DX-, is a limited use in IX- (where the Sec. 3.1.1 intent statement limits residential uses to the upper stories of mixed-use buildings), and is not permitted in OP-. Under Sec. 3.1.1, NX- also carries a maximum lot size of 10 acres.

Every mixed-use district must carry a height designation (Sec. 3.1.2): -3, -4, -5, -7, -12, -20, -30 or -40. Under Sec. 3.3.2 each designation is the maximum number of stories, and the -3, -4 and -5 designations also carry limits of 50, 68 and 80 feet. A frontage designation such as -PL (Parking Limited), -UL (Urban Limited) or -SH (Shopfront) may also apply and sets how buildings and parking meet the street (Sec. 3.4.1). A -CU suffix marks a conditional district, where the base district's rules apply unless the adopted conditions are more restrictive (Sec. 1.3.2).

Among the residential districts, R-10 is the only one in which the Apartment building type is allowed under the conventional development option (Sec. 2.2.4). Within the City, our screen centers on districts that permit multi-unit living, RX-, OX-, NX-, CX- and DX-, with IX- reviewed case by case because of its upper-story limit on housing.

Raleigh has broadened where housing can be built. According to the City's Missing Middle FAQ, text change TC-5-20, passed in the summer of 2021, permitted two-family homes in all districts except R-1 and townhouses conventionally in R-6, and TC-20-21, adopted May 10, 2022 and effective August 8, 2022, permitted two-unit townhouses in R-4 and allowed denser residential development near planned high-frequency transit.

The City describes the resulting Frequent Transit Development Option as allowing more density and multifamily housing near planned high-frequency transit. For RX-, OX-, NX-, CX- and IX- lots, UDO Sec. 3.7.1 provides that property zoned for three stories, with at least part of each lot inside the mapped Frequent Transit Area, may build Apartment or Mixed Use buildings containing residential uses up to five stories and 80 feet, provided at least 20 percent of the units in the added stories are affordable to households at or below 60 percent of area median income for at least 30 years. The bonus does not apply in the -TOD overlay or in a BRT Area mapped in the Comprehensive Plan, and a building that uses it must meet the Urban Limited frontage unless another urban frontage is mapped, with no drive-thru on the site.

The Transit Overlay District (-TOD) is set out in UDO Sec. 5.5.1. The City has said it intends to apply it mostly to property along its bus rapid transit corridors that is already zoned for commercial and multifamily development. In mixed-use districts it allows height in stories to increase by 50 percent when the added stories are residential and carry the same affordability commitment, or by 30 percent for buildings with no residential use. It also prohibits several auto-oriented and storage uses, including vehicle sales, car washes, self-service storage and warehouse and distribution, which matters for land currently used that way.

Wake County's other municipalities and its unincorporated area each apply their own ordinance, and district names do not translate. R-10 in Raleigh allows apartments; R-10 in unincorporated Wake County is a single-family attached or detached district with a maximum density of 4.35 units per acre. We key every site to its planning jurisdiction and read that jurisdiction's code before we price it. Sites in Durham and elsewhere in the Raleigh-Durham metro are reviewed under the ordinance that governs them.

We identify and screen sites with our own analysis of public records: Wake County parcel and assessment data, municipal zoning maps and overlay layers. That work points us to parcels where the zoning supports density and the land is worth more than the improvements on it. When a submission arrives, a principal reads it within 24 hours. We then confirm zoning, entitlement path, utilities and comparable land trades. Qualified sites receive a written letter of intent stating price, deposit and closing timeline. Diligence runs under the letter of intent, the deposit is hard at signing of the purchase agreement, and we target a funded close in 30 to 60 days with no financing contingency.

Owners, LLC managers and commercial brokers can submit through the portal on our home page or by email to ashwanth@hardgatecapital.com. Please include the owner or entity name, parcel ID or address, acreage, asking price or valuation expectation, current zoning and improvements, and any LOI, offering memorandum or survey. Submissions are handled as described in our Privacy Notice.

This page is general information, not legal advice.