Charlotte, N.C.—Approximately 1,200 multi family units in four developments are going up within about a half-mile of each other along the city's new lightrail line.
These projects are scheduled to open in 2009, and it will be a fight to grab renters, says Charles Dalton, president of Real Data.
The light-rail line, the first in the state, has exceeded expectations in its first year, averaging more than 16,000 trips a day during the week, nearly double the original projections. Private development investment along the LYNX has topped $1.8 billion. However, the ride won't be quite as smooth for developers this year as they face a tough economy.
More apartment and condominium developments are planned along the rail line, but some are expected to be delayed as wary developers move cautiously in the year ahead.
Overall, the city has about 5,000 units under construction, which equals about 5 percent of the current inventory. The accelerated supply of apartments will outpace demand until at least 2010, according to Dalton.
The supply of new units recently pushed the vacancy rate to 9 percent after hovering at about 7 percent for much of 2007 and 2008, says Laura Newman, an associate at Marcus & Millichap.
Following several quarters of good rent gains, rising vacancies will mean more moderate rent growth in the near term, adds Newman. Recent reports show rents averaging $751 per month.
The job factor
For most markets, the big issue in 2009 is the economy and job growth. That's the case here, where population expanded from about 541,000 in 2000 to 696,000 last year. Although it has enjoyed strong job expansion in recent years, the city will face new challenges this year.
Dubbed “Banktown,” the finance center is home to Wachovia and Bank of America, two major employers going through tumultuous times. Wachovia is expected to merge with Wells Fargo, and Bank of America plans to buy Merrill Lynch. It's an anxious time because the effect of these moves remains unknown.
Fortunately, the city is home to many Fortune 500 companies outside of the banking sector, including Lowe's, Duke Energy, and Goodrich Corp.
Crosland opens communities
Several local developers plan to take a more patient approach to building in 2009. Owners of new condo developments are also rethinking their projects.
The 27-story Catalyst project in Charlotte is scheduled to finish construction in January. The 462-unit development has been planned as a condo project, but its developers are looking at the possibility of converting the tower to apartments. Talks will be held with the development's financial partners to discuss a rental option, says Tony Skillbeck, president of Novare Group's Carolinas division.
Crosland, LLC, is one of the Southeast's leading real estate firms, with an asset portfolio and project pipeline that have a market value exceeding $2 billion.
The firm recently opened several apartment communities that offer some insight into the local market, which has seen a lot of office and high-density residential development downtown. Much of the residential development was for-sale housing.
While others competed for land downtown, Crosland went a little farther out for one of its most recent projects, says David Ravin, president of the residential division. The firm converted an old cotton mill to an upscale apartment community near the Uptown neighborhood.
The $25 million Alpha Mill Apartments has leased well and is about 93 percent occupied, according to Crosland. This shows how much pent-up rental demand there has been, Ravin says. The apartments rent for approximately $1.32 per square foot.
The award-winning project, which features 167 apartments in eight buildings, is notable because it has helped expand the urban growth border, according to Ravin.
After opening Alpha Mill, Crosland developed 940 Brevard, a 100-unit affordable development for seniors next to the market-rate community. The seniors housing community was financed with about $10 million in low-income housing tax credits, $1 million in state housing tax credits, and about $300,000 from a HOPE VI grant from the Charlotte Housing Authority, says Dionne Nelson, Crosland's vice president of affordable housing.
The development shows that affordable housing can be integrated into a neighborhood and be as attractive as other developments. “It made for a really attractive combination,” she says.
Crosland is also the developer behind The Apartments at Blakeney, a 295-unit community that is part of a 270-acre multi-use development that the firm has created in south Charlotte. Blakeney includes retail, office, and open space.
“We're still very bullish about the opportunities,” Ravin says.
If the national development slowdown has a silver lining, it's that developers are concentrating on their core markets, he adds. For Crosland, one of those key cities will continue to be Charlotte.