Charlotte 'the new Austin, Texas' for job growth?

Charlotte was not included among the top 10 markets to watch for commercial real estate during an industry forecast Tuesday.  But the Queen City got some promising nods for its growth potential. A moderator even said Charlotte could be “the new Austin, Texas” in terms of its ability to attract people, create jobs and grow the office market.

Austin, a tech-hub often favored by real estate analysts, ranked No. 4 on the list of hot markets.

Charlotte was also mentioned for its strong apartment market and net migration.

Overall, commercial real estate investors and developers feel more confident about the industry than in previous years, speakers said during a webcast titled “The pulse of the commercial real estate industry,” by PwC. PwC, along with the Urban Land Institute, releases the Emerging Trends in Real Estate, a report based off surveys and interviews, that has highlighted the industry since 1979. The webcast talked about the survey and other trends.

“It’s official, we’re in a recovery,” said Chuck DiRocco, PwC’s director of real estate research. But, he said “it’s recovery anchored in uncertainty.”

Investors have been buying and selling properties in the larger cities, including San Francisco, New York and San Jose, which the survey listed as the top 3 markets to watch. Since the recession hit, investors have favored the larger cities located near ports, known as 24-hour gateway cities.

But the gateway markets have become crowded and prices for prime properties have risen to near pre-recession levels, DiRocco said.

So investors are moving back into the secondary markets, which include Charlotte, Raleigh, Memphis, Portland and Nashville.  Raleigh ranks No. 11 on the list of markets to watch; Charlotte is 17th.

Investors are especially interested in cities that have strong high technology, energy, education and healthcare industries, DiRocco said.

When determining the hot markets, the forecast’s authors focused on markets that can best sustain strong job growth, as well as those boasting strong population growth.  Charlotte got a mention for its strong net migration - ranking 7th out of the 51 metropolitan areas studied.

“Where the jobs are at -- that is where investors are looking,” DiRocco said.

Some economists have recently said Charlotte’s economic growth, as well as the nation’s, has been disappointing. One local economist criticized Mecklenburg County, and North Carolina, for adding jobs too slowly. But there have been promising signs of recovery.

While commercial property prices remain well below their pre-recession peaks, for example, Charlotte’s uptown posted a record year for office building sales in 2012. Brokers sold more than $500 million worth of office buildings, including the iconic Hearst Tower. Brokers involved in the deals say the buyers are national and international institutions.

During Tuesday’s 90-minute presentation, moderators stopped to ask the more than 250 participants to answer survey questions. One question asked people which secondary market they would consider acquiring a stabilized office property in during 2013. Respondents could choose from Denver, Charlotte, Austin and San Jose.

Charlotte was the clear winner, receiving more than 37 percent of the vote, prompting moderator Mitch Roschelle to say “Charlotte may very well be the new Austin, Texas. That is good news in that front.”

In the published forecast, respondents also pinpointed Charlotte, San Francisco and Chicago as “market movers” when it came to new development going forward.

Webcast presenters also addressed the apartment market, which is booming nationally as well as in Charlotte. Rents are forecast to rise, but DiRocco said the industry could be getting overbuilt, possibly by 2014 or 2015.

Nationally, retail has lagged most among commercial properties. The retail industry is still in recession and might move into recovery in 2014, according to the webcast. 

“I think investors remain optimistic. They feel the recovery is real. And I think they feel that commercial real estate continues to offer some of the best risk-adjusted returns,” said PwC's Susan Smith, one of the forecast's authors.