CHARLOTTE – A panel of real estate specialists said Monday that Charlotte can expect to see recent job, population and economic growth continue, especially if the banking industry starts generating more jobs.
“If banking gets going, Charlotte could be looking at record-breaking job growth,” said panelist Kevin Thorpe, chief economist and principal at DTZ, who provided a market overview before the panel discussion began. DTZ is a global property services provider with headquarters in Chicago that last year acquired Cassidy Turley, which Thorpe had been with since 2007.
More than 400 people attended the event, the Eighth Annual Outlook on the Commercial Real Estate Market, hosted by GreerWalker LLP and Katten Muchin Rosenman LLP, at the Ritz-Carlton, Charlotte.
Thorpe said the industrial market is “on fire,” absorbing 2.7 million square feet in 2014 – double the historic norm. He said the vacancy rate is 4.8 percent, that developers are “severely underbuilding” industrial space, and that those who venture into building speculative space would likely see solid returns.
He also highlighted the return of office development to uptown and the apartment-building boom over the last several years. He said that while apartment vacancies may rise and rents may fall as a result of the 10,000 units expected to be delivered between January 2014 and the end of this year, those units should stabilize in the long-term based on projected population and job growth.
All of the panelists expressed optimism about Charlotte’s future, but they were careful to not write off unforeseen circumstances.
As an example, Thorpe said that only months ago, few could have predicted the recent steep decline in oil prices.
“It was a shock, what happened to oil prices. We knew that supply was ramping up, but the way (prices) plunged…I don’t know that we know fully the implications of what this could do” in the long term, he said. He also cited economic instability in Russia as having potential global implications.
Panelists said one of their biggest concerns regarding future growth is that North Carolina isn’t doing enough to offer incentives to companies to relocate or stay in the state. Moderator Daniel Huffenus of Katten Muchin Rosenman asked them if the state needs to be doing more to improve incentives.
Incentives are “a factor of corporate relocations in our country today, period, and for us to sit on the sidelines and not participate in that is foolish,” said John Boylan, president of Spectrum Properties Carolinas.
C. Walker Collier III, a partner at Trinity Capital Advisors, agreed that North Carolina will need to offer better incentives to keep existing companies and to attract prospective companies in order to compete with its neighboring “rival,” South Carolina.
Movement Mortgage LLC recently announced it was relocating its national headquarters from Virginia Beach, Va., to Bailes Ridge Business Park in Lancaster County, S.C., which will include moving about 160 employees out of Ballantyne Corporate Park in Charlotte. South Carolina’s tax incentives were a big draw for the company, which could be eligible to receive up to $53 million in exchange for bringing 650 jobs into Lancaster County within the next five years.
Panelist Elizabeth Wilson, chief credit officer at Fifth Third Bank, said one of her concerns is the formation of a “herd mentality” among developers, which can result in the construction of too much of the same type of product.
As far as new development strategies go, Collier said Trinity Capital Advisors is focusing next on suburban office space, which the company expects to benefit from the region’s job growth and because properties in and around uptown were reaching peak values.
Collier said his worst fear was “not knowing and not being able to identify when 2007 is here again,” referring to the real estate bubble that burst and led to the Great Recession.
In discussing future office development, Thorpe said it’s hard to know where it may occur next, but that the general demand for office space could be predicted by tracking airport passenger traffic at Charlotte Douglas International Airport. He showed a graph that showed that over the past several years, the demand for office space has moved in sync with passenger counts, lagging by two quarters.
“The more people that are flying,” he said, “the more business is getting done.”