A Golden Age for Charlotte Multifamily?
For Charlotte multifamily, development's strong, occupancy is up, rents are growing. That's why we're excited to host our Bisnow Charlotte Multifamily Boom! event, beginning at 7:30am next Tuesday (Aug. 18) at the Ritz-Carlton Charlotte.
Charlotte's fully recovered from the Great Recession and is poised for a golden age, Crescent Communities SVP-Mid-Atlantic Ben Collins, who will be one of our speakers, tells us. "A high quality of life and strong economic base have driven domestic migration, thus fueling demand for apartments, and we don't see that trend slowing any time soon." Ben's snapped with CohnReznick partner Cristi Lewis at a previous Bisnow event.
Those fundamentals have supported record levels of apartment construction, which has been necessary to support demand, Ben adds. "We also don't expect overbuilding over the next several years, but rather an appropriate balancing of supply and demand."
Cortland Partners partner Lou Davis, who will also be a speaker, agrees that Charlotte is not going to be overbuilt through this cycle. Despite inventory increasing by nearly 11,000 units (7.4% of total), the overall occupancy for the market has only declined to 95%. Not only that, he says, effective rents have continued to rise, indicating that Charlotte has been able to absorb all the new units by drawing in well-educated, young professionals who demand the type of units being delivered.
Could Charlotte multifamily outpace the population? No, says Grubb Properties VP of real estate development Rachel Russell, another of our speakers. "But we certainly could have so many units in one submarket or another that rents there are forced down," she says. "Still, I believe we will see multifamily continue to grow, both in the number of units and in rent, particularly in the neighborhoods with public amenities." Rachel's snapped second from left at the groundbreaking for Link Apartments Glenwood South in Raleigh.
Northwood Ravin VP-development Ben Yorker, who'll be a speaker at our event, tells us there's a lot of evidence to suggest that demand for rental housing will remain high for some time, but that observation is a generality. "The truth is, demand is distributed widely over different price points and market types," he says, adding that, unfortunately, only a small subset of multifamily development opportunities are in vogue with lenders and institutional investors. "I feel it’s likely that we'll have significant overrepresentation in certain product types and submarkets. And we’re seeing that the sweet spot for underwriting new deals has become even tighter, leading to more crowding within a specific space and product class."
Walker & Dunlop VP Brett McGuire, also a speaker, says that "the possibility of overbuilding in the Charlotte market is something that we in the lending community track closely. I know that finding a perfect equilibrium has always been challenging as developers have to accurately anticipate not only new supply, but future demand drivers. Overall, our firm is very excited to be in the Charlotte market."
Brett adds that recent deliveries from the urban core all the way to the Fort Mill/Rock Hill markets have been well-received and have shown solid lease-up velocity. "Over 6,000 permits were pulled in 2014 and 12-month future deliveries are expected at well over 4,000 units," he notes. "Obviously, that's a lot of new supply, but what we hear is that vacancies might increase slightly (from below 5% to between 6% and 7%) in the short-term." The three- to five-year rental growth and household formation projections suggest the area should create more than enough demand to absorb the current deliveries, Brett says. Join us for the Bisnow Charlotte Multifamily Boom! event, beginning at 7:30am next Tuesday (Aug. 18) at the Ritz-Carlton Charlotte. Sign up here.