Tomorrow’s Real EstateToday: Charlotte region poised for additional growth and healthy recovery

Sponsored Content by CohnReznick, Lincoln Harris, Camp North End, Carter Bank & Trust | May 21, 2021

 

Fourteen months after a global pandemic darkened commercial real estate across Charlotte, local real estate experts are bullish on recovery.

Already, the industrial and residential real estate sectors are white hot, driven by ecommerce for the former and strong population and job growth for the later. While office and retail thrive on a case-by-case basis, there is reason for confidence. Even the hospitality sector sees better days ahead as people begin to travel again.

“I think we have seen how resilient this economy has been through this and that has been really encouraging,” says Scott Williams, senior vice president and investment director for developer Lincoln Harris. “We can think we are as smart as we can be, but we are also thankful that the two markets we play in, Charlotte and Raleigh, are beating the pants off the rest of the US.”

Williams expressed his enthusiasm for Carolinas’ real estate as part of the Charlotte Business Journal’s Tomorrow’s Real Estate Today panel, which brought together developers, accountants, and bankers to discuss how the sectors are faring. Joining Williams on the panel were Cristi Lewis, partner with CohnReznick who leads the firm’s Charlotte commercial real estate and construction practice, Tommy Mann, development director for ATCO Properties who is leading the redevelopment of Camp North End, and Zac Snyder, regional executive and senior vice president of Carter Bank & Trust. Robert Morris, editor of the Charlotte Business Journal, moderated the panel.

On returning to pre-Covid activity

Business activity cratered in March and April of 2020 to levels not seen since the Great Depression. Since May, Charlotte’s economy has been clawing back.

“The same attributes that made Charlotte such an attractive city for investment before the pandemic have not changed, including lower cost of living, lower taxes and a great climate,” Lewis says. “Even throughout the pandemic, the housing market is still booming.”

Charlotte is not yet back to pre-pandemic levels of development, Lewis says, with challenges still being felt in the hospitality and retail sectors hit hardest by the pandemic. Other sectors are doing well, driven by people and investment coming to the city.

Snyder says he feared the worst at the start of the pandemic. However, liquidity in the market and job growth has accelerated the trend of people moving to Charlotte, and that has propelled new opportunities, Snyder says.

“I feel like we have kicked into another gear here in Charlotte, and the Carolinas as a whole. Some asset classes are still struggling of course, but from a lender perspective there’s a lot to like about the current market.”

Williams says low interest rates have driven liquidity in the market, which has helped to push up prices for land and real estate.

“Our development pipeline is stronger than it has ever been,” says Williams. “We have more potential millions of square feet right now on the verge of development than we have ever had in the company’s history.”

On why the Carolinas is so hot

Charlotte’s housing market ranks third on Quicken Loans hottest housing markets. Likewise, Raleigh’s market has low supply and high demand.

“It’s the easy answer to say it’s the weather, but there’s truth to it,” Williams says. “Being from Kansas, where we have neither mountains nor beaches nor a moderate climate, it’s a huge boost.”

Charlotte is central between New York and Florida, creating a half-way stopping point for those moving between markets, Lewis says.

And the airport – the 7th busiest in the world in aircraft movements – creates connectivity for business leaders, says Snyder.

“We also have several growth factors working for us, such as corporate relocations, an MLS soccer team and a new medical school coming here,” Snyder says. “Not to mention, it’s affordable to live here. It may seem expensive to us, but relative to other markets, it’s quite economical.”

On how Charlotte compares to other markets

Panelists say many of the same dynamics driving Charlotte’s robust real estate market are also at work in other peer markets, such as Austin, Nashville and Atlanta.

“Austin has a secret formula that has served it well; Keep Austin Weird,” Mann says. “It’s not just marketing. It permeates that entire city and has allowed it to think more creatively than other cities around the country. That creative thinking has led to attracting not only companies but also people getting out of college.”

Lincoln Harris is busy with corporate relocation clients who often consider Charlotte among Nashville, Atlanta and Austin. Williams says the biggest knock against Atlanta is traffic and the cost of real estate, which is $10 to $20 more per square foot in Atlanta.

“That is a big deal for companies like Wells Fargo and Bank of America, where the cost of living for their employees is one thing, but the cost of operating their business is such a huge factor.”

Williams says Charlotte continues to do a good job of offering a desirable living experience for young workers but has not priced itself out of the market.

Lewis says the value of assets has held up in the pandemic, and in some asset classes, such as industrial and single-family rental homes, cap rates are decreasing, which is a sign of strength. Smaller shopping malls are struggling, and movie theaters face a future full of unknowns.

On Legacy Union’s complex development

Lincoln Harris has delivered 1.5 million square feet as part of its 10-acre Legacy Union development, which includes the signature Bank of America Tower. The transformative project on the former site of the Charlotte Observer straddles SouthEnd to uptown.

Going from a site with environmental issues to a new campus for new Charlotte Fortune 100 company Honeywell and Deloitte has been a complex endeavor, Williams says.

While many of Charlotte’s uptown towers remain relatively empty as the Covid-19 pandemic stretches to its 14th month here in Charlotte, Williams says Lincoln Harris’ leadership believes multi-tenant office buildings will still be in demand, even if offices internally are less dense.

“We have four projects that we are doing drawings on because we are so bullish on Charlotte and Raleigh and what we see coming into those areas.”

On 2020’s impact on Camp North End’s development

ATCO Properties is on the third phase of redeveloping 76-acres just a mile north of uptown that include 1.3 million square feet of World War II-era buildings. So far, 250,000 square feet have been delivered in single-story office, restaurant, and retail space.

Despite being elbow deep in development during the pandemic, ATCO Properties didn’t skip a beat, says Mann. The nature of the development, he says, lends itself to the kinds of spaces people will want to visit in a post-pandemic world.

“We took advantage of the fact that we had 1.3 million square feet of existing single-story buildings across a giant site with tons of outdoor space,” Mann says. “The office and retail spaces are oriented toward the outdoors with dedicated entrances. There are no shared elevators or lobbies. Every tenant has their own dedicated HVAC system.”

“We signed some of our biggest office leases in 2020 and opened more retail than any previous period, and they are all doing well and optimistic for what the future holds. And we started construction on our second phase in 2020.”

On real estate adapting to demand

As some building types fall out of favor post-pandemic – such as movie theaters – panelists talked about how developers and investors are finding ways to use old buildings in new ways.

“It has been eye-opening how flexible people can be with their reuse and converting tired old spaces into something the market does demand,” says Williams.

Snyder added that big box retail sites that are no longer viable are being used as last-mile distribution sites for ecommerce or as call centers.

“There is always a higher and best use,” Snyder says. “On the lender side we try to understand those trends.”

Mann, who is overseeing the redevelopment of Camp North End’s three million square feet of total density, says adaptive reuse can be riskier than new construction because of unknown building conditions.

But those buildings provide character and a sense of place that people desire.

“What really makes Camp North End work is the fact that we have attracted this incredibly diverse set of tenants,” Mann says. “What we offer is the ability to be in an environment where tenants are surrounded not only by other businesses like themselves but also surrounded by artists and musicians, by people creating things and at the top of the culinary arts. It’s that experience and culture that companies are realizing inspires their people.”

Panelists

Cristi Lewis, Partner, CohnReznick

Cristi Lewis is an audit partner based in CohnReznick’s Charlotte office. She is a member of the firm’s Construction Industry Practice. Cristi has more than 15 years of public accounting experience encompassing financial statement audits, accounting, business consulting, agreed upon procedures engagements, regulatory compliance, and benefit plan audits. Her industry experience includes construction contractors, commercial real estate, residential multi-family housing, and governmental agencies (including PHAs). She has also worked with many small business clients. Throughout her career, Cristi has been tasked with planning and performing audit, tax, and agreed upon procedures engagements while also providing training, supervision, and work reviews for audit associates. She has extensive experience planning and executing audits in compliance with GAGAS, HUD audit guidelines, and OMB A-133. Her real estate and construction industry experience includes commercial and multi-family residential, land development, specialty contractors, and property management. She has also worked extensively on due diligence engagements for an SEC client relative to the acquisition of contractors across the country.

Tommy Mann, Development Director, Camp North End

Tommy Mann is Development Director for ATCO focused on all ongoing redevelopment efforts for Camp North End including leasing, design, and construction. Prior to joining ATCO, Tommy developed urban infill mixed-use projects in Washington DC. He was Director of Development at Kettler, Federal Realty Investment Trust, and Crosland working in retail and mixed-use projects. Tommy holds an MBA from the Darden School of Business at the University of Virginia and a Bachelor of Science in Business Administration from the University of North Carolina at Chapel Hill.

Zac Snyder, Regional Executive SVP, Carter Bank & Trust

Zac Snyder has spent his entire 16+ year career in the banking industry, including the past three years at Carter Bank & Trust as their Regional Executive. In his current role, he oversees Commercial Banking for the Western region of the state, an area that spans from Charlotte to Mount Airy and everything west. Zac also serves on the Bank’s Executive Loan Committee, reviewing and approving all loans and relationships exceeding $10 million. He has been involved in over $500 million in real estate transactions over the past three years. Zac holds a Certified Commercial Investment Member (CCIM) certification and serves on the North Carolina State Board of CCIM. Zac also hold an MBA from Wake Forest, graduating with distinction.

Scott Williams. Senior VP, Investment Director, Lincoln Harris

Scott Williams manages the analytics and research that drive Lincoln Harris’ development and acquisition businesses as well as plays a lead role in business development with Lincoln Harris’ institutional capital relationships. He spent 17 years in fixed income sales and trading, prior to joining Lincoln Harris, where he worked as an investment banker, a structured bond trader, a product specialist, and a salesperson. Scott’s previous experience in capital markets, combined with his various roles at Lincoln Harris have afforded him a unique perspective on commercial real estate from idea genesis through divestment.

Moderator

Robert Morris, Editor, Charlotte Business Journal

Robert Morris is editor-in-chief of the Charlotte Business Journal. A business journalist for three decades, Morris joined CBJ in 1992 as a commercial real estate reporter. He has led the newsroom since 2002 as it transitioned from a primarily print newspaper to a digital-first media operation. Our journalists focus every day on telling the story of the Charlotte region’s dynamic economy and the businesses that are leading the way. In our weekly print edition, our special publications, our 24/7 digital operation and our content and awards events, CBJ takes you inside the important issues facing the region, introduces you to the people making a difference and explores the solutions to our collective challenges.

 

Read more at: https://www.bizjournals.com/charlotte/news/2021/05/21/tomorrows-real-estate-today-charlotte-region-grow.html?fbclid=IwAR3oaor–vZm8qmScUDNW8sp7IrvoteCgDJsHu8MkG9QclIh8Zy6X-Y65Uo