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Demographics boost local multifamily market

skyline_720.webSome 45 attendees gathered at the Charlotte City Club on Tuesday morning for an update on the latest trends in real estate at an annual breakfast held by the local chapter of The Risk Management Association.

Featured speakers were Jay Colvin IV, director of real estate data provider Metrostudy, and Jessica Rossi, a consultant at Kimley-Horn and Associates Inc.

Rossi focused on the demographics that have led to “an exciting time” in the local multifamily market. She cited statistics that have boosted demand for apartments, including the addition of 42,000 households in the Charlotte metro area between 2010 and 2014. Some 50 percent of those were in Mecklenburg County, she said.

Part of the increase in migration to the Queen City can be attributed to the area’s job growth. Charlotte’s urban core has seen an increase in demand for an educated workforce, offering jobs in the technology, health, and professional-services sectors, she said. The suburbs are accommodating employers with large operations requiring access to the airport, manufacturing and distribution. Unfortunately, she said, rural areas face continued distress in part because of their lack of proximity to interstate highways.

The Charlotte metropolitan statistical area saw a 1.4 percent increase in employment between 2008 and 2013. That compares with a 1.2 percent drop nationally, Rossi said.

Mecklenburg County led the region, with 19,000 new jobs in that time period.

Population growth led the area to average 4,300 units of net apartment absorption over the last five years, well above the long-term annual average of 3,000 to 3,200 units. And, she said, pent-up demand caused the apartment vacancy rate to increase only 50 basis points despite the addition of 10,000 new units over the last couple of years.

Mecklenburg County has a vacancy rate of 6.6 percent, Rossi said. Regionally, Gaston County has the lowest rate, at 3.9 percent. Iredell County posts the highest rate, at 12.1 percent.

To meet demand, developers have 10,000 units under construction in six local counties. Eighty-five percent of them are in Mecklenburg County.

Moving on to corporate real estate, Rossi said there are 17 million square feet of office space in uptown’s thriving market. Traditional considerations such as cost and convenience still play a major role in deciding where to locate a company, she said. However, management now also looks at the local climate when deciding where to set up, creating demand for transportation options, open green spaces, and a diverse population.

Colvin, meanwhile, talked about developments in new-home construction that include a short supply of available lots and the increased building of higher-priced homes. New-home construction, he said, used to focus on the entry-level buyer. That, he said, is a thing of the past.

“We’re really not building any of that entry-level (housing),” he said. Higher costs, along with the tight inventory of existing homes, are causing people to rent out of necessity, he said.

New construction will focus on those aged 50 and above, as well as empty nesters and those moving up from their existing residences. Opportunists will concentrate on millennials, the “new” entry-level buyer seeking high-end townhomes in urban areas, he said.

Based in Philadelphia, The Risk Management Association is a nonprofit that seeks to advance the use of sound risk-management principles in the financial-services industry. The organization has 2,500 institutional members that include banks and other financial institutions.

Tuesday’s event was sponsored by the Business Expansion Funding Corp., a Charlotte-based provider of 504 financing.

 

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