Business

How Raleigh recovered from the Covid-19 pandemic

RALEIGH, NC—Employees from software company Pendo arrive in Raleigh on a Monday morning and grab a coffee at a company-supplied bar staffed by baristas. Later, at lunch, Pendo sends them down the street with $15 coupons to spend at a local food hall, where they can throw axes for fun while ordering lobster, tacos, or fish and chips.

In 2020, the pandemic emptied Raleigh’s central business district. Some downtown businesses kept their windows covered with sheets of plywood for months after protests sparked downtown vandalism following the death of George Floyd. More than 10,000 tourism jobs were lost in the surrounding county, dealing a severe blow to one of the country’s strongest economies.

Now Raleigh is back. The metro area rose to No. 3 in an annual survey of U.S. job markets conducted by The Wall Street Journal, after ranking No. 21 in 2020. In 2021, the civilian labor force grew by more than 30,000 and there were large increases in wages and jobs. The leisure and hospitality industry boomed as business and travel restrictions were lifted. Several big-name companies have announced major expansions, financings or plans to set up new operations in the region, from Fortnite maker Epic Games Inc. to tech giant Apple inc

and alphabet inc

Google.

One of the companies participating in this revival is Pendo, a software company founded in this city nine years ago. In 2021, around 450 new employees were hired and work was completed on a new headquarters that will fill the top five floors of a new downtown high-rise. Pendo’s name is on the top of the building.

“Last year was a huge boost for us,” said Todd Olson, Pendo’s chief executive.

The region’s recovery also attracted new residents and helped boost one of the hottest real estate markets in the US. Real estate values ​​rose 29.4% in 2021, according to analysis by real estate brokerage firm Redfin,

that was the seventh largest jump in the country.

By mid-2021, the county surrounding Raleigh was adding an average of 67 people a day, according to government estimates. Meanwhile, larger, more expensive metros like New York City and San Francisco experienced declines.

Patrick Roberts, who moved from Albany, NY to the Raleigh suburb of Holly Springs, NC in 2021 with his wife and three children, is one of those newcomers. He and his wife had previously lived in the Raleigh area, and when his job as a technology sales manager went haywire, he asked his manager if he could return. They paid $55,000 over the asking price for their new home, he said.

“My wife and I always knew that if we ever had the opportunity, we would return to North Carolina,” said Mr. Roberts. “That was our happy place.”

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In 2021, Patrick and Liz Roberts relocated to Holly Springs, NC from Albany, NY with their children Olivia Roberts, Owen Roberts and Aubrey Roberts. They were among the many newcomers to the Raleigh area that year as the job market recovered.

Raleigh has long been recognized as one of the nation’s top regional economies thanks to a lower cost of living compared to places like New York, its many area universities, and the dynamism surrounding Research Triangle Park, a 7,000-acre complex established in the 1950s Founded by local leaders and academics looking to expand beyond agriculture, furniture and textiles.

The park is at the geographic center of three powerful local institutions: North Carolina State at Raleigh, University of North Carolina at Chapel Hill, and Duke University at Durham. Park researchers invented AstroTurf, cancer-fighting drugs, the barcode, and technology that helped develop cell phones. The surrounding universities — along with others in the region — produce about 42,000 graduates annually, according to the Raleigh Chamber of Commerce, and many students remain to seek employment opportunities. Many other local industries benefit from this ecosystem, notably tourism, hospitality, restaurants and retail.

Those strengths worked in Raleigh’s favor before the pandemic. The number of workers in the technology industry increased at an annualized 4.2% from 2015 to 2019, or a total of 5,179, according to the Brookings Institution. That was one of the highest for medium-sized cities.

But Raleigh has proven just as vulnerable to the toll of the pandemic as other cities across the country. Many local employers closed their offices as they sent workers home, and local hotels, retail outlets and restaurants suffered from a lack of business travel. Overall, Greater Raleigh jobs fell by about 12%. The local tech industry hasn’t been able to catch up; in 2020 only 131 employees were added.

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Research Triangle Park is a major job generator for the Raleigh area. Pictured here is an entertainment space made from shipping containers that recently opened at the park.

As Covid-19 vaccines became widely available and the state reopened in 2021, the region snapped back. Raleigh’s metro area has created nearly 10,500 jobs in the leisure and hospitality industry, and 29,800 across all industries, according to Moody’s Analytics. The number of jobs in transportation and utilities increased by 45% compared to February 2020, driven by a boom in e-commerce spending. Wages rose as demand for these services increased and vacancies became difficult to fill.

A slew of announcements from local and national tech companies in 2021 promised even more jobs in the years to come. Epic Games, the local maker of the hit video game Fornite, bought a mall and said it would become a new headquarters campus by 2024. Apple said it would build a new 1-million-square-foot campus in Research Triangle Park by 2023, and Google said it would build a new Google Cloud Engineering Hub in nearby Durham.

“These tech jobs are high-paying jobs,” says Matthias Kehrig, an economist at Duke University. “As more people live in the area, they will also create demand for other services.”

Numerous signs of the city transition are visible in downtown Raleigh. The plywood panels that covered storefronts in 2020 are gone, and people fill restaurants and shops during the workweek. Hundreds of technicians work in different office spaces within the span of several blocks. Some are in coworking spaces provided by startup host Raleigh Founded, which has 1,400 members representing 465 companies in four locations.

“We’ve seen a tremendous influx of remote workers. It happened before Covid, but the pandemic has just picked up speed,” said Jess Porta, chief executive of Raleigh Founded.

Others are at Red Hat, an open source software company founded in Durham and now owned by International Business Machines corp

The company hired around 450 people last year and currently employs around 2,500 people in the region. It draws on nearby universities for career-ready workers, said Tim Humphrey, IBM’s senior state executive in North Carolina, and supports the computer science program at Shaw University, a historically black university in Raleigh.

“We have a good pipeline of talent,” said Mr. Humphrey.

Pendo, which started in 2013, recently relocated to its new 150,000-square-foot space on Hillsborough Street, which offers expansive views of the city. Pendo CEO Mr. Olson said his company experienced a slight slowdown in 2020 when the pandemic first hit, but the company was able to bounce back within a quarter. In the past year, the company has added more than 500 customers and with the addition of around 450 employees, it has a total workforce of around 1,000.

To lure workers back downtown, Pendo installed a coffee bar as well as a pizza oven that produces fresh slices on Thursdays.

“I think the future of the modern office isn’t about tying people to desks,” said Mr. Olson. “It creates opportunities for people to experience the benefits of working with people face-to-face.”

write to Bryan Mena at bryan.mena@wsj.com

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https://www.wsj.com/articles/how-raleigh-rallied-from-the-covid-19-pandemic-11650636006?mod=pls_whats_news_us_business_f How Raleigh recovered from the Covid-19 pandemic

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