The Multifamily Boom's Great (Except for a Few Things)
What was it Gordon Gekko said? “Booms, for want of a better word, are good.” (We’re paraphrasing a little). But booms have their side effects, as panelists at Bisnow's New Development and Rezoning for the Future: Charlotte’s Multifamily Boom pointed out: higher development costs and fewer sites to develop.
The fundamentals of a boom are still in place: rents are still rising because demand is strong for Charlotte multifamily, and development is doable in core and suburban markets. But it’s getting a little harder to make those deals work, despite (or maybe because of) those fundamentals. That also means that investors--especially out-of-state, institutional types--might still be eager to do deals here, but they’re more cautious. Over 200 real estate pros came to the Westin Charlotte to hear our experts and, clearly, to do a little schmoozing. (That fella on the left either logging a business card or checking Twitter.)
Selwyn Property Group partner Grey Poole and Charlotte Assistant City Manager Debra Campbell, who until recently was the executive director of the Charlotte-Mecklenburg Planning Dept. Development has been consistent with plans for growth: Higher density projects are rising in the core markets--Uptown, South Park, Ballantyne--and areas with major thoroughfares. In transit corridors, density can be as high as 40 or 50 dwellings per acre.
Terwilliger Pappas division executive Tom Barker and Partner Engineering and Science senior project manager Michael Chang, who moderated. Though still chugging along, development’s getting tougher, the panelists explained. Costs are up, for one thing, both for land and labor. And many neighborhoods have very strong ideas about what they want, and don’t want, from new developments. Working with community groups early in the development process--as early as possible--is critical, the panelists agreed.
CohnReznick partner Cristi Lewis, who also moderated, and Charter Properties partner John Porter. The pressures on development brought up another question: Are all of the best sites gone? The consensus: All the low-hanging fruit is long gone, leading developers to look at sites that aren’t quite great locations, or maybe have other issues. Land owners are still willing to sell, however, to capitalize on the development climate.
USAA Real Estate Co director Zac Vuncannon and Crescent Communities VP Ben Collins. Transit-oriented districts have been very successful from a development standpoint. That’s because they’re reaching critical mass, with residential and retail, especially along the Blue Line. Critically, areas along that line appeal to Millennials. There might be a temporary concern about oversupply, but institutional investors are keen on the long-term prospects of more development along the Blue Line, especially in the South End.
Spectrum Residential president Steve McClure and Gingko Residential CEO Phil Payne. Another trend the panelists cited is a renewed interest in for-sale product. It isn’t coming to the market on a large scale (yet) but in the form of infill townhomes and clusters of small condo projects. Another growing multifamily subtype in Charlotte is student housing. In terms of quality and amenities, it’s hard to tell the difference between student housing and higher-end apartments. The demand is there because local universities are growing rapidly.