If magazines are any indicator, 2006 was a very good year for Asheville, N.C. It was recognized as Southern Living magazine's reader's choice for best mountain destination. It was among Forbes' Top 25 Best Places for Business and Careers and ranked seventh in Kiplinger's Personal Finance 50 Smartest Cities. It had the distinction of being named one of the nation's 50 Best Singles Scenes by Men's Journal and one of the Best Places to Retire by Money magazine.

It doesn't hurt that Asheville is home to award-winning dining and just 30 minutes from all sorts of outdoor activities such as water rafting and skiing. With all this going for it, Asheville makes easy work of attracting renters from all walks of life. The city's challenge now lies in keeping multifamily development and investment at the metered, thoughtful pace that is critically important to local residents and officials.

“The City of Asheville has seen significant interest in the apartment and condo market, starting with rehabs of existing mixed-use buildings in our downtown CBD, and now moving into many new construction projects,” says Sam Powers, Asheville's economic development director. “Our city council has a goal of promoting higher-density, high-quality construction and also working to meet other city priorities such as affordable and workforce housing.”

FROM PAST TO PRESENT As the largest town in western North Carolina, Asheville and its larger metro area of Buncombe County (pop. 218,000) has long been a hub of commercial and residential activity. Once a manufacturing-based economy, the market today is driven largely by tourism dollars and is commonly referred to as the “Boulder of the East,” complete with the honor of hosting the Colorado Rockies minor league baseball team, the Asheville Tourists.

EASTERN TWIN: Some say Asheville, N.C., is the “Boulder (Colo.) of the East.” In its November 2006 Ashville Area Economic Indicator Report, the Asheville Area Chamber of Commerce and Asheville Metro Business Research Center reported that, through September 2006, Asheville had a job growth rate of 2.4 percent for the last 12 months. Unemployment sits at just 3.2 percent.

Though the report stated that manufacturing still contributes $898 million annually in wages, a shift toward medical and hospitality-based services is now clearly in play. The service industry, for example, is up 3 percent. The even larger health services sector, with 26,000 workers, is helping meet the needs of an over-50 population that, according to Money magazine, makes up almost half of Asheville's population and is growing at a rate of 7.16 percent. This compares to the overall metro population, which according to the U.S. Census Bureau has grown by 6.1 percent since 2000.

Yet while population and employment is up, average income for greater Asheville workers remains lower—at a median of $37,000 annually—than many other parts of the country. Local housing costs also are consistently ranked as the second highest in the state, leaving many priced out of the homebuyer market and competing for a finite number of multifamily properties that are limited not only by the increasing cost of construction but also Asheville's shortage of flat, developable land and rigorous local planning standards.

RIGHT PLACE, RIGHT TIME These factors leave most multifamily developers and investors searching for that magic formula that makes sense on paper and in the court of public opinion. Because of Asheville's generally improving renter demographic, this means that those that can afford to build new units are largely pursuing Class A product that may cost more to construct but that will provide higher returns based on demand. Proof of this is clear among Asheville's existing Class A complexes, each of which has experienced a more than 4 percent increase in rents in the last year, doubling their forecasted 2 percent growth. Eighty percent of these complexes are 100 percent occupied, with the newest and nicest of their units renting for $1,300 per month for three bedrooms.

Most of the new Class A product coming on line is being delivered by established developers that either own land or have the capital resources to get such projects off the ground. Just 12 minutes outside of downtown Asheville, for example, locally based developer Biltmore Farms is delivering Biltmore Park, a master-planned live-work-play community that in addition to single-family neighborhoods and commercial space includes Town Square at Biltmore Park, a high density mixed-use component that will be Asheville's largest mixed-use district outside of downtown. The project incorporates environmental and New Urbanism principles encouraged by the local government, with nearly 500,000 square feet of retail and office space, a new YMCA, a 150-room hotel, and 287 multifamily residences, most of which will be located over retail space.