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December 4, 2013
Charlotte Industrial Boom in '14?
In 2014, major investors--such as LCR, buyer of the former Continental Tire HQ--will remain bullish on Charlotte industrial properties, PPR's Charlotte-based economist Kyle Merville tells us. (At first we were skeptical of his predictions because he didn't know who will win The Voice, but we'll give it a shot.) Here are some reasons why:
1) Demand is there.
Demand has grown during the past three years, and Charlotte investors can expect that to continue with an improving national economy, Kyle says. (Not only that, the buzz is back, bringing with them strong demand for warehousing all the new Charlotte Hornets gear). Also, Charlotte's regional warehouse market will show further signs of improvement as homebuilders finish their suburban communities and retailers expand to serve their customers in the Piedmont. Metro Charlotte vacancies are currently at 7.9%, and gently falling, with limited supply in the pipeline.
2) Supply isn't there (yet).
Almost nothing is under construction in the metro area, Kyle says. (All the cranes must've flown south for the recession.) There's been a steady decrease in supply (3.6M SF) to more than offset the 2.5M SF of deliveries since 2008. Eventually, development will ramp up--nearly 4M SF is on the drawing boards--but it's going to take a while. Locally, smaller warehousing in South End and NoDa is shifting to State Line and Airport locations, as warehouses make way for new apartments and offices. Increasing the attraction of those submarkets is Norfolk Southern's new intermodal yard at Charlotte Douglas, replacing the congested yard in NoDa (pictured: the new intermodal site, whose completion will be next year).
3) Rents are still growing.
With pending construction on the horizon, the recent high rent growth seen in Q3 will come back down to Earth. But even so, rents will continue upward somewhat, Kyle predicts. Favorable market fundamentals have attracted institutional investors, especially in the State Line submarket. Overall prices are still low relative to historic norms, providing opportunities for investors.
Montford Drive on a Roll
Another prediction for 2014: Charlotte's Montford Drive area will continue to grow as a retail and entertainment spot, and as a place to live, ARA Charlotte director of investment analysis John Heimburger tells us. Over the last five years, Montford Drive has transformed from a row of older restaurants and bars into a branded niche in Charlotte identified by high-quality restaurants and bars catering to the younger working set. For instance: an old doctors' office retrofitted into Bruce Moffitt's latest tapas restaurant, or Park Lanes undergoing a major redo into a hip nightclub/restaurant/bowling alley. (It's the perfect place to go to meet young singles or find out how outdated your clothes are.)
"Montford" now stands alone as its own viable submarket, John says. It provides more connectivity between uses--nightlife, restaurants, shopping, greenway trails--than most of Charlotte's infill submarkets, so it's growth and revitalization will continue as the upcoming generation of recent college grads is lured. (That's the nice thing about college students, they're always graduating.) Investors like it, too. Recently John, along with colleagues Blake Okland, Dean Smith, and Sean Wood repped Cornerstone Real Estate in its sale of the 205-unit Cielo apartment complex for more than $41M to Va.-based Weinstein Properties.
Mr. Smith Goes to the Council
Congratulations to New South Properties of the Carolinas' Kenny Smith, who was sworn in Monday to represent District 6 on the Charlotte City Council. He's snapped with his wife Bridget just after the event. There'll be many hot topics in 2014, he tells us, such as what to do about the airport, and the Eastland Mall site. Most in commercial real estate and construction would like to see the permitting process streamlined, he notes, which would involve working with county officials as well. "Finally, it's imperative we keep the city on sound economic footing."
Brothers & Sisters of Movember!
Our favorite month has ended, but before you shave that glorious mustache, don't forget to take a picture and send it to firstname.lastname@example.org or before this Friday, Dec. 6 to qualify to win the Bisnow Movember Challenge. Remember to include the following information: a photo of your team, the names, your team's city of origin, and the amount of money raised. We can't wait to see those dazzling 'staches!