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Working to Keep Charlotte Affordable as the Region Expects Rapid Growth

With a series of recent high-profile
economic development wins, Charlotte, North Carolina, has affirmed its status
as a market to watch for real estate investors.

Placing fourth in the rankings for best overall real estate prospects in Emerging Trends in Real Estate® 2020, copublished by ULI and PwC, the Queen City recently landed the corporate headquarters of Honeywell International, as well as Truist, the bank that will result from the merger of BB&T and SunTrust. The city also benefited from in-market expansions, including a 2,000-employee tech center announced by home improvement retailer Lowe’s and a 400-job expansion announced by Microsoft.

Panelists at a recent ULI
Charlotte event acknowledged that the city has much to be thankful for as it
heads into 2020, but they also noted the need to protect Charlotte’s quality of
life and relative affordability, which have been key to attracting economic
development and outside investment.

“[Affordability] is one of the
things that drives these companies to come to Charlotte,” said Julie Porter, president
of the Charlotte-Mecklenburg Housing Partnership, a nonprofit development firm
focused on housing for low- and moderate-income families. “We need to keep

Because the city’s housing
starts aren’t keeping up with its population growth, Charlotte’s housing market
is “incredibly strong,” Porter said, but the lack of inventory is pushing prices
ever higher; Charlotte ranked second for homebuilding prospects in Emerging Trends. At the end of October, the
region had a two-month supply of housing inventory, according to the Charlotte
Regional Realtor Association, down 25 percent from a year earlier, and the
median sales price had increased by nearly 10 percent to $253,000. Five to six
months of housing inventory is generally considered a balanced market.

“There’s a shortage of housing
across the spectrum,” Porter said. “We’re still about 34,000 units short of
affordable housing for people who earn less than 50 percent of AMI [area median
income]. We see those types of shortages continuing.”

The announcement by Lowe’s that
it would anchor a new 23-story office tower just outside Charlotte’s central
business district in the South End neighborhood underlined the city’s emergence
as a destination for technology companies and their employees. Last fall,
CompTIA’s 2018 Tech Town Index found that Charlotte was the number-one city for
information technology workers, on the basis of job opportunities and cost of

“I think in 2020, with our
growth in tech talent, we’re really going to see a lot of these small tech
companies with rapid growth plans,” said Fran West, who leads business
recruitment efforts for the city of Charlotte.

The city needs to continue
recruiting tech employees because the demand for talent outstrips what local
universities like the University of North Carolina–Charlotte can currently produce,
she added.

“How do we do that? By keeping
our quality of life really high and our cost of living really low,” she said. “We
have to make strategic investments in our infrastructure, our housing, and in
the places that talent wants to be because companies are going to chase

The Charlotte market was ranked
third for investment in the industrial sector in this year’s Emerging Trends, with 61 percent of
respondents rating it a buy, behind only Austin, Texas, and Washington,
D.C./Northern Virginia. Pete Pittroff, a managing director with JLL, said he
expects industrial vacancy in the region to approach 5 percent by the end of this
year, with rental rate growth up by more than 5 percent on a year-over-year

Though Pittroff said he expects
another good year in 2020, he expressed concern about the trajectory of
construction costs.

“What happens if construction
costs continue to rise and rental rate growth stops?” he asked. “To me, that
collision looks a little uncomfortable.”

Rising costs are affecting
property owners across all sectors. While Charlotte’s rental rates for retail
space remain relatively affordable compared with those in other markets, land
prices are putting pressure on landlords to raise those numbers, said Charles
Thrift, partner of Charlotte-based Thrift Commercial Real Estate. As a result, property
owners are having to bring in tenants from outside Charlotte that are more
accustomed to higher rents, he said.

“There’s complaints I hear
about driving out the local businessperson,” Thrift said. “It is harder to find
the local operator that’s going to be willing to step up and pay those rents.”

These challenges are still the
byproduct of a healthy local economy, however, and Pittroff said he reminded
himself of that when it took him an hour to navigate nine miles (14.5 km) of
traffic to his home recently.

“I was riding along thinking, ‘This is awesome,’” he said. “It just means that we’re growing.”

WILL BOYE is a senior public relations executive with Yellow Duck Marketing.

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