What Makes Charlotte, NC a Top Market for Commercial Real Estate Investment?

Charlotte, NC Top Market for Commercial Real Estate Investment
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Charlotte is the most populous city in North Carolina. In fact, it is the second-largest in the Southeastern United States, second only to Jacksonville, Florida.

You would think the Charlotte area offers a low-risk, low-yield opportunity. Yet commercial real estate investors are excited about its prospects because, surprisingly, it still has room to grow and plenty of it.

As both a tech hub and family-friendly location, Charlotte is drawing in millennials looking to find good jobs and put down roots. So much so that Charlotte topped the U.S. in millennial population growth from 2005 to 2015, according to U.S. Census Data.

And Charlotte ranks an impressive number 4 in overall real estate prospects for US Markets to watch and number 2 for Homebuilding Prospects in the recent Price Waterhouse Cooper (PwC) and the Urban Lands Institute (ULI) Emerging Trends in Real Estate 2020 report.

In this article we’ll look at three pieces that, when taken together, make a strong case for investing in Charlotte, as well as what puts it over the top.

High occupancy and high rent

Charlotte is a landlords’ market. Vacant rental units are in short supply, with many potential renters looking for space. While that might seem typical of many desirable U.S. cities, the extent of the housing crunch is particularly noteworthy in Charlotte.

According to Yardi Matrix’s Charlotte: At Peak Velocity Multifamily Report Summer 2019 report, “At 95.0% as of March, occupancy rates in Charlotte were 20 basis points above the national average.”

A surge in population growth is responsible for the lack of rental inventory. Yardi also finds, “Between 2010 and 2017, the metro added 302,000 residents, a 13.6% uptick, more than double the national rate through that interval.”

With strong demand, rent prices are rising. Yardi also notes, “With rents increasing by 3.4% year-over-year through April, growth is still above the national average.”

Economic opportunity

High rental values won’t last without a solid core of jobs to support renters’ income. On this front, Charlotte has its bases covered. The local economy has been bubbling up for a while. Companies have been lured to the area, and investment in infrastructure has the city in position for a strong future.

Yardi notes, “The metro gained 29,200 jobs in the 12 months ending in March, a 2.3% increase, well above the 1.6% U.S rate.” They also note that employment has outperformed national averages in the past few years, making this no one-off event.

And the new jobs are diverse rather than being tied to one specific sector, which helps prevent Charlotte from being vulnerable to an industry change. The PwC report says that Charlotte is bringing technology and manufacturing firms into the area, helping it expand and diversify the local economy past the banking sector that was its focus over the last 20 years.

And there’s investment going into keeping the fire going. Yardi highlights, “Projects boosting trade, transportation and utilities are also underway,” noting the first phase of a 19-acre transit hub to be finished in 2022 and the next phase of Charlotte International Airport’s 10-year, $2.5 billion renovation.

Housing development struggling to keep pace

With economic opportunity drawing in workers to a saturated rental market near peak capacity, housing development in Charlotte is on the rise to help relieve the pressure.

Yardi notes that, mostly in response to local population growth, approximately 13,000 units were under construction as of April, with much of those units going into desirable neighborhoods around Charlotte’s downtown and southern submarkets. The report highlights Grubb Properties’ 450-unit Link Apartments Montford Park as well as the upcoming 550-unit Link at Elizabeth as two of the largest.

But more development is needed to meet demand.

Yardi points out, “A study by the National Multifamily Housing Council and the National Apartment Association showed that the Charlotte region is expected to need at least 72,000 more apartments by 2030, which is part of the reason why the building surge shows no sign of stopping and rents are still on an upward trajectory.”

More to come from Charlotte

With its strong population growth, high rental values, and economic opportunity, Charlotte is a strong prospect for real estate investment.

But when you add to this mix population growth set to soak up new housing and further raise existing rents, Charlotte rises to one of the most recommended cities for real estate investment among investment professionals.

All signs point to continued population, job, and multi-family rental growth for the foreseeable future. As Yardi puts it, “High demand coming from Millennials and Empty Nesters shifting from single-family homes to rentals is likely to maintain good absorption going forward.”

Sounds like a “buy sign” to us.

At Birchstone Investments, we’re on the lookout for investment opportunities in the Charlotte multifamily real estate market. If you’re interested in learning more about commercial real estate investment opportunities in North Carolina or another area of the Southeastern United States, join the Birchstone investor community today.

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Jerry Hollifield

Jerry Hollifield

Jerry is the Managing Principal & Chief Investment Officer at Birchstone Investments, LLC. With a business career that spans more than 30 years, he has been involved in the acquisition, development, financing and management of over $400 million in real estate. In addition, he has been involved in more than 40 Merger and Acquisition transactions with total value exceeding $600 million.

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