Banktown is a boomtown these days. Apartments are sprouting everywhere, office tower construction is back uptown and rents are rising as people continue to flock to Charlotte. And a panel of experts said this week that they expect the growth to continue.
The eighth annual commercial real estate forum sponsored by accounting firm GreerWalker LLP and law firm Katten Muchin Rosenman LLP was held Monday at the Ritz-Carlton. The almost 500 attendees and the buoyant mood were themselves indicators of how well things are going right now - no more talk of cliffs and our falling off them.
"It's been really remarkable to watch how Charlotte has progressed," said DTZ chief economist Kevin Thorpe. "We're actually starting to see the local commercial real estate markets thrive."
Here are some of the panel's key points:
- Eye opening chart of the night: This graphic totally surprised me. Charlotte's office absorption tracks the growth of travelers at Charlotte Douglas International Airport almost perfectly. Both likely reflect the health of the local economy and business travel.
- Apartments look like a bubble, but aren't yet: The panelists agreed that Charlotte is building a ton of apartments (all you have to do is look around on any drive in Charlotte and you're sure to see a few under construction). So is it a bubble? Thorpe said no. "Multifamily will overbuild briefly. Vacancy will hit 9 percent," said Thorpe. That's almost double the current rate. But with population growth estimates strong - especially Millenial renters - there will soon be enough demand to tighten vacancy rates up quickly. "Most of those apartments will be rented," said Thorpe. The real question: What happens when all those Millenials (myself included!) hit prime home-buying age in five to seven years? That's when things could get interesting.
- There's still plenty of unmet need for office space: Demand for office space has been growing in Charlotte faster than new deliveries for four straight years, Thorpe said. Vacancies have tightened up and rents have moved up. But Walker Collier III, a partner at Trinity Capital Advisors, said his firm doesn't have much of an appetite for spec offices. They're looking for an anchor tenant to kick off Trinity's planned 14-story tower at S. Tryon and Morehead streets. Collier also said his firm is looking for suburban office parks to invest in, which he said have been underbuilt in recent years as people flock to center city areas.
- Charlotte needs way more industrial space than it has: "Charlotte is way under-building industrial right now," Thorpe told the audience. "Severely under-building." Rents for industrial space jumped 5.1 percent last year and could grow by double digits this year, Thorpe said.