While Charlotte’s uptown area will continue to develop and benefit from an improving economy, the region’s suburbs are next in line to attract development, according to Kimley-Horn economist Frank Warren, who spoke Tuesday at the year’s first luncheon of the Charlotte chapter of Commercial Real Estate Women.
Warren’s underlying message was that the region’s suburbs will soon see heavy development, and demand will be greatest for two specific types of development: single-person homes and mixed-use projects.
Warren’s presentation, “Charlotte’s New Normal?” looked specifically at how recent employment and demographic shifts could affect how the region is developed in upcoming years.
He pointed out that between 2012 and 2014, 42,000 of the region’s 62,000 new jobs were in Mecklenburg County, and that the number of people commuting to work in the county is growing “exponentially.” More commuters come from Union County than any of the surrounding eight counties, followed by Gaston County and York County, S.C.
Warren also foresees a shift in how suburbs are developed and what they look like.
Warren said the number of single-family homes being built annually is declining, creating what he described as a “new normal” for the number of homes delivered each year.
The 30-year average for the number of homes built in the U.S. is 1.2 million. That number was 2 million in 2006, and dropped to an average of about 500,000 homes between 2008 and 2011. Warren said that three year period was unusually low due to the housing market crash, and that the new normal could be between 750,000 and 1 million homes, the range in which homes have been completed over the last few years.
“The other question is, are they going to own, or are they going to rent?” Warren asked in response to the declining number of single-family homes being built, in addition to the increasing number of homes being rented rather than owned in the region.
The demand for single-person homes has steadily increased, more than any other household size over the last 13 years.
Warren also said he expects to see millennials transitioning from living in apartments to buying homes, a trend that he expects to continue as long as the economy keeps improving. He also said millennials’ demand for communities with amenities within walking distance could prompt more multi-use development in Charlotte’s suburbs, including those targeting singles.
Following his presentation, CREW members asked questions about his outlook on apartment development. One CREW member asked Warren about the potential for the over-building of apartments.
He said the vacancy rate would undoubtedly go up, but he does not expect it to reach more than 8 percent or 9 percent, which he said did not signify over-building, noting the vacancy rate six years ago was around 12 percent.
Warren also said the suburbs might begin seeing the redevelopment of its apartment buildings, many of which are now 30 to 40 years old.