Charlotte is notable for its distinct-yet-charming neighborhoods, pleasant subtropical climate, and a healthy contingent of high-level employment opportunities within the financial sector.
Oh, and a thriving apartment market.
The Queen City, located in the Piedmont Region of North Carolina, seldom is regarded as one of the nation’s largest cities, but ranked No. 15 in 2022, boasting a population greater than that of San Francisco, Denver, and Washington, D.C. While multifamily markets in those cities are often regarded as more prominent, Charlotte has certainly joined the fray.
“Charlotte has the primary characteristics of what you like to see in a market in that it’s large with a diverse economy,” says Brian Schneider, principal and co-founder of Addison Partners, a New York-based apartment owner. “It’s a prominent regional hub with a heavy finance component, with Wells Fargo having a sizable presence. It’s experiencing great population growth with many younger generations relocating there. It’s just a fun and vibrant city that draws renters.”
According to a market insights report from NorthMarq, Charlotte has experienced increased demand, accelerating rent growth and a steady vacancy rate of only 4.8% in the second quarter of 2022. The city had 20,657 units under construction as of the second quarter. “The local investment market remained competitive during the second quarter with activity gaining momentum, per-unit prices rising, and cap rates remaining low,” according to the report.
Home to the corporate headquarters of Bank America and Truist Financial—and the East Coast headquarters of Wells Fargo—Charlotte ranks as the second-largest banking city in the U.S., trailing only New York City. The city also boasts a collection of eclectic neighborhoods, from Uptown (the city’s downtown area), Fourth Ward, SouthPark, South End, the arts district of NoDa, and several more.
Three operators recently imparted their thoughts on the market, sharing some of their immediate and upcoming plans in the city.
Developments Underway in a Thriving City
Mill Creek Residential Trust expanded into Charlotte in 2019 and is rapidly building a presence within the city. The prominent developer, builder, and operator, based in Boca Raton, Florida, also added a regional office in the city, which underscores the its fondness.
“Charlotte is consistently ranked as one of the best places in the U.S. to live,” says Alex Eyssen, senior managing director in the Carolinas for Mill Creek. “Charlotte’s population has been steadily growing, and demand continues to outpace supply. This became even more evident during the pandemic, when remote workers and families relocated from other cities to Charlotte.”
Mill Creek is developing Modera SouthPark, a 239-unit community in the popular SouthPark neighborhood, which is projected to open in early 2024. The company recently broke ground on Modera LoSo, located in the rapidly growing Lower South End submarket, which will feature a sky lounge overlooking Uptown. In addition, Mill Creek acquired the Alister Uptown community in Uptown.
Eyssen says the highest rent per square foot is typically attributed to the Uptown and SouthPark communities, but that several SouthEnd communities have recently risen to the top. Other light rail-adjacent neighborhoods are poised to experience increased demand, as well. Likewise, pockets west of Uptown—such as FreeMoreWest, the Wilkinson Boulevard corridor, and areas northeast of Uptown—are also experiencing growing interest, he says, along with every county adjacent to Mecklenburg County.
Investment activity in the city's multifamily market remains strong, Eyssen says, as several institutional investors and REITs that have historically favored major gateway markets have recently targeted the Queen City.
“Almost everyone has a neighbor or colleague that relocated to Charlotte in the last two years,” Eyssen says. “I don’t see that trend stopping. Charlotte also is part of a regional, prosperous economy that attracts a talented and educated employment base, many of whom are relocating from markets where renting is commonplace. Thus, we view Charlotte and the surrounding areas as having great fundamentals.”
Poised to Expand to Charlotte
Ashcroft Capital has not yet joined the Charlotte market. But the fully integrated multifamily investment firm, based in New York, certainly has its eyes on the city.
"We hope to plant the Ashcroft flag in Charlotte sooner than later as we have been exploring opportunities in the market for several years now," says Scott Lebenhart, chief investment officer of Ashcroft Capital. "Charlotte's population growth and relative affordability continually draw interest from investors. The attractive business climate, established infrastructure, and excellent quality of life has created the type of strong growth that we target in our investments.”
Lebenhart says it's possible that when Ashcroft expands to the market, it could be more than just a small splash. The company spends a considerable amount of time studying the intricacies of a potential new market and creates economies of scale and efficiencies within the market. He points to the company's presence in Atlanta, where Ashcroft purchased more than 3,400 units in the last year and a half.
Lebenhart says the presence of major companies within the Charlotte MSA has helped strengthen its fundamentals, specifically naming Bank of America, Wells Fargo, Microsoft, Nuveen, Honeywell, Truist and Coca-Cola as businesses that provide stability to the economy here. Employment, population, and income growth make Charlotte an extremely attractive market to invest in, he adds.
“As with most larger Sun Belt markets, Charlotte has seen a tremendous amount of investment activity,” Lebenhart says. “In the last 12 months, we have continued to see large institutions target investments in the Charlotte area. There have been $7.5 billion of apartment transactions over the past 12 months. Although we are seeing investment activity slow down—along with activity throughout the rest of the country—we are still seeing a lot of investor demand for product in the Charlotte MSA.”
Lebenhart says Ashcroft will be diligent to invest in areas of Charlotte where demand will be the strongest moving forward, aiming to avoid any submarkets where absorption rates are affected by the influx of incoming supply.
Workforce Housing and Surrounding Markets Are Thriving, Too
Addison's Schneider says a friend he describes as a "diehard New Yorker" planned a temporary move to Charlotte. He has been there 11 years. Another friend, a New York-based attorney, moved to Charlotte and took a 20% pay cut. But they experienced a 50% reduction in expenses and a less-hectic living experience, so it qualifies as a win.
Addison, which owns the Tanglewood apartments in the Derita-Statesville neighborhood, believes the Charlotte multifamily is well positioned to continue to excel.
“It’s always a good sign when there is a lot of development underway, because that underscores market growth,” says Mary Stewart Malone, principal and co-founder of Addison Partners. “Towns surrounding the Charlotte area have reaped the benefits of the city’s demand, as has workforce housing. As new higher-class product arrives, the need for quality affordable housing also experiences an uptick.”
Companies that target workforce housing acquisitions can thrive in the city, Malone says, because the sector doesn’t directly compete with Class A.
“Charlotte has solid job growth, and not just workforce jobs,” Malone says. “For young people living in the South, I think Atlanta and Charlotte are the two primary contenders for the most desirable job market. Charlotte even gets its fair share of professionals who relocate from New York and other larger Northeastern markets.”
Schneider notes that Charlotte's heavy concentration of finance jobs could mean the market could be hit slightly harder than others if a recession occurs, but that would make it an immediate bounce-back candidate, as well. He also notes that looking outside the immediate metro area could serve as a strong investment strategy because many secondary locations are starting to add mixed-use centers, breweries, and other experiential developments, which is a solid sign of emerging population growth.
“It’s a great market to buy in,” Malone says. “I think anyone who looks to invest in the Sun Belt looks at Charlotte. I don’t see how you couldn’t.”