Outlook expressed

2011 is officially over, and some in the real estate and construction
industries are glad to see it end.

Although some sectors, such as apartments, had a strong year thanks to the single-family housing market’s woes, officials in other sectors, such as construction, said 2011 was a tough year.

But what about 2012? Will it be the year the real estate and construction industries finally come roaring back?

Probably not, some in the industry say. Still, some are hopeful that
positive trends that began last year
will continue.

Here’s what 10 industry leaders had to say about 2011 and what they expect in 2012.

Edison Cassels
President, Edison Foard

It was another challenging year in the construction business, and sales were about the same as 2010, about half of what we had been seeing in the previous five years. It will continue to be challenging in 2012 but a bit better. The price increases we’ve been seeing will hold. Suppliers and manufacturers can’t afford to sell below cost any more because of pressure from their stockholders, and subs and contractors must show plans for profitability if they want to get bonds. They have to have more reasonable markups if they are going to continue to operate.

Greg Copps
Charlotte partner, Colliers International

It’s been an extremely positive year for the industrial market, especially compared to 2009, when there was about a million square feet of negative absorption, and 2010. The absorption rate has been phenomenal: 1.2 million square feet after three quarters, double the total for all of 2010. The vacancy rate is down to 12.7 percent. I expect this trend will continue in 2012. But the lease rates, averaging about $3.25 per square foot, don’t warrant new
construction. They need to get into the high-$3 range.  But the demand is there, and there’s a lack of product.
By midyear or late 2012, we’ll see
announcements for new buildings to come online in 2013.

John Culbertson
Founder, Cardinal Real Estate Partners

Real estate has been a Charlie Sheen market: beaten up, getting no
respect and not going anywhere. It’ll
be rougher than rough before it’s over, although things won’t get worse next year, just be stagnant and depressing. Office deals are getting done, but the large amount of shadow space is becoming apparent, and they don’t impact vacancy rates. All development will be lackluster until the banks start lending again. But I am optimistic about the fourth quarter. The Democratic National Convention will be the catalyst we need for things to take off. The Coliseum submarket has seen its worst days, and development will eventually beat a path there as the airport expands.

Bryan Knupp
Senior vice president, Edifice

We’re hopeful we’ve seen the bottom this past year. We’re seeing some recovery in revenues and, even more encouraging, opportunities for profits.
Because of the intense competition, margins have been whittled down next to nothing. It may not be the comeback year in 2012, but the trends are
upward, and by this time next year the increase could be sharp. We’re seeing some increased willingness from banks to do loans. For the first time in three years, one of our private clients got a loan this fall. Projects that have been on hold for two years are finally getting in place to start.

John Komisin
President, Little Diversified
Architectural Consulting

We had a pretty good year, at least relative to the past several. Revenue was up nearly 20 percent over 2010, ahead of 2009 but not yet back to 2008 levels. We added staff in each of our offices in response to the increased workload and were able to pay bonuses again. We hope 2012 continues this trend, but the crystal ball is hazy. The economic fundamentals that drive construction, such as retail sales, office vacancy and job creation, are showing some improvement. But the continued uncertainty in the financial markets, particularly in Europe, is still requiring caution on spending for building projects.

George Maloomian
President, Cambridge Properties

Apartments have benefited from the collapse of the housing market. We’ve gone from an historically high rate of close to 70 percent homeownership to about 62 to 63 percent. That’s creating a demand for apartments, and the vacancy rate is in the single digits. I expect we’ll see 2,500 apartments added in 2012, especially along South Boulevard and in the Northlake Mall, Ballantyne and University City areas. Rental rates will go up significantly. We won’t see a lot of new homes built. Resales will bottom out in 2012, and we’ll start to see a rebound in 2013. The retail market is overbuilt here, and it could be two or three years before we see new construction.

Tony Plath
University of North Carolina at
Charlotte professor

The industry outlook has been trending negative for some time. But it’s been volatile, too. The smallest piece of news creates an uptick, but it’s short-lived. In 2012, we’ll see more of the same and limp along: slow growth, low inflation and low interest rates. I predict a 2 percent growth activity and no growth in employment. Because of companies’ thin margins, we’ve seen a lot of bankruptcies. In the Carolinas, we’ve seen a 40 percent drop in the number of contractors over the last few years. The companies left should make it through 2012, but we’ll see some consolidations. It’ll be 2014 before we see any significant growth.

Pat Riley
President, Allen Tate Co.

In 2011, there will be an increase in sales units and volume over 2010. The Carolinas bottomed out in October 2010, and we are in the midst of a slow and steady climb to recovery. Buyer confidence is at the root of what 2012 will become. It will be hindered by depreciation of home values, over-stringent mortgage reform, the elections and lingering shadow inventory. Interest rates will be a positive counter to those deterrents, along with aggressive new construction opportunities. The Carolinas remain a magnet for job creation and population growth, and those newcomers will all need places to live.

Pat Rodgers
President, Rodgers

We saw a dramatic falloff in 2008 and 2009. 2010 and 2011 were pretty tough, and I expect 2012 and 2013 to be tough, too. Some projects that were held up are moving forward, but they are smaller. If companies are growing, they are not building buildings, so we are seeing more renovations and upfits. I think we’ll see material price increases of 3 to 8 percent next year.
We can’t continue absorbing these increases, so we may see some inflation. We’ll continue to see subs going bankrupt. We’re planning to do a little hiring this year to address new technologies, but we are very cautious about taking on any debt.

Anne Vulcano
First vice president, CBRE

It was a relatively healthy year for the office market in 2010. We had some phenomenal announcements downtown, like Chiquita moving here and taking
about 143,000 square feet in NASCAR Plaza and Transamerica relocating to the Bank of America
Plaza. I think we’ll see some increased activity in 2012, but it’ll be a slow and steady improvement. The press we’ll get from the Chiquita announcement and the Democratic National Convention will make people want to do things, and, psychologically, people like to follow success. But only Mr. (Smokey) Bissell will
be building (at Ballantyne). Properties will change hands, likely the office space at Whitehall and
maybe Toringdon.