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Who is going to buy all the Condos, (Part II)


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Corporate investor buyers are buying even more of SF housing stock in Mecklenburg County.  from 2nd quarter 2022.  However I think this starting to slow down with higher interest rates which hurt these investors margins.

https://www.wsoctv.com/news/local/corporate-housing-purchases-rise-mecklenburg-county/HZNXAN6HFNFUJO2SQZGBV42BUA/

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2 hours ago, KJHburg said:

10 highest average rents in apartment buildings in Charlotte all in Uptown or Southend  from the Biz Journal

https://www.bizjournals.com/charlotte/news/2022/11/30/south-end-uptown-apartment-rents-housing-costs.html?

Where apartment rents are the highest in Charlotte
The 10 apartment communities in Charlotte charging the highest rents are all in uptown and South End, according to Addington and Real Data. This ranking is based on the average monthly rent for a two-bedroom unit:

Museum Tower, 525 S. Church St. in uptown: $3,585 per month
Ascent Uptown, 224 W. 3rd St. in uptown: $3,231 per month
Hawk, 1932 Hawkins St. in South End: $3,225 per month
Novel Atherton, 2100 South Blvd. South End: $3,102 per month
The Vue, 215 N. Pine St. in uptown: $2,960 per month
Centro Square South End, 222 West Blvd. in South End: $2,949 per month
Element Uptown, 355 W. Luther King Blvd. in uptown: $2,947 per month
Maddox South End, 2630 South Blvd. in South End: $2,865 per month
The Reed, 401 Graham St. in uptown: $2,796 per month
Camden Southline, 2300 South Blvd. in South End: $2,791 per month

I cant read the article but once my abode many years ago, Ashton, should be on this list, most 2 beds are +3000 nowadays. 

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Here is the key point higher construction costs and higher interest rates are slowing the starts of apartments.

Key paragraph from the Ledger

""In the 10-county Charlotte region, 1,345 multifamily units have been started in the fourth quarter of this year — about one-quarter of the number from the fourth quarter of 2021, according to figures from real estate data company CoStar Group.

“There is a noticeable drop-off in projects breaking ground,” says Chuck McShane, director of market analytics with CoStar. “… The challenging financing environment due to rising interest rates as well as higher construction costs have raised uncertainty, which has raised some caution in commercial real estate in most markets, including Charlotte.”

Higher rents ahead? It is an unusual circumstance. A slowdown in new construction often stems from a glut of supply and falling demand. In Charlotte’s case, there is widespread agreement that the city needs more housing to accommodate future population growth. Assuming the growth continues, the shift toward building fewer apartments and townhomes now could result in sharply higher rents in the future. It typically takes about two years for apartments to go from breaking ground to completion""

remember there are many already underway but we are talking new starts and remember this includes the greater Charlotte area which includes many locations in the suburbs. 

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from the same Ledger article about SF homes in Mecklenburg so those waiting for a huge drop in home values will be disappointed.  there is still a short supply of homes and now even home construction is slowing which means even less inventory going forward. 

Look at the data about office starts.  As I said for the next year or two proposals may come and go but what breaks ground will be the newsworthy,   (that includes all these proposed apartment towers)   Real estate both commercial and residential is about in a recession if not already.  Be prepared for slower growth at least for next 12 months across the board in development.   That is what doubling of the interest rates in a short period does. 

 

 

""Data shows that other sectors of Charlotte’s formerly go-go real estate market are slowing down, too:

Single-family: The number of building permits issued for single-family homes in Mecklenburg County in the last three months fell by about half, compared with the same period in 2021, according to a Ledger analysis of county permit data.

Office: Construction of new office buildings has almost ground to a halt. According to CoStar data, just 28,000 s.f. of new offices started construction in the 10-county Charlotte region in the third quarter. That’s about the size of half a grocery store. It’s the lowest figure for new office construction since the second quarter of 2012.

Industrial and retail: Other real-estate sectors are holding up better. The industrial sector, which includes warehousing, is having a record-setting year for new construction, according to CoStar data. New retail construction appears stable.""

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In another housing sector:

Aldersgate Senior Living planned a new 125 unit development on the 40+acre property of the Jewish Community Center. This arrangement with the Jewish Federation which oversees the property was to be a satellite of Aldersgate with transitions to the original campus available. Permitting in 2018 and sales started in 2019 then covid halted everything for 18 months. Then the construction cost rises were clearly permanent not transitory. Finally the increase in interest rates put the project in jeopardy. Depositors were told last month that the project is dead and all deposits returned. No other satellite locations are considered.

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On 12/15/2022 at 9:20 AM, tarhoosier said:

In another housing sector:

Aldersgate Senior Living planned a new 125 unit development on the 40+acre property of the Jewish Community Center. This arrangement with the Jewish Federation which oversees the property was to be a satellite of Aldersgate with transitions to the original campus available. Permitting in 2018 and sales started in 2019 then covid halted everything for 18 months. Then the construction cost rises were clearly permanent not transitory. Finally the increase in interest rates put the project in jeopardy. Depositors were told last month that the project is dead and all deposits returned. No other satellite locations are considered.

Yeah, we responded to an RFP on this back in April 2017. A project sign with a rendering is still up at the corner of Providence and Jefferson.

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Axios looks at apartment rents in Charlotte vs.  Raleigh vs.  Atlanta.  

Atlanta is higher than both Charlotte and Raleigh.  Charlotte is showing up higher than Raleigh but my theory is that Charlotte has more high rise apartment towers than Raleigh thus driving the average rent up here in Charlotte. 

https://charlotte.axios.com/322352/charlotte-renters-are-paying-more-for-smaller-apartments-compared-to-those-in-raleigh/

avg. 1 bedroom in CLT is $1667 and in Raleigh it is $1630 

https://charlotte.axios.com/305003/rent-comparison-charlotte-vs-atlanta-apartment-prices/     This is from august of last year

Atlanta residents pay an average of $1,861 for an average 971-square-foot apartment. 
Charlotte residents pay an average $1,639 for an average 942-square-foot apartment. 

To quote Axios my thought bubble:  Here in Charlotte concessions will increase especially on new apartments to get them leased up as a lot of supply is coming on line and for existing apartments means lower price increases.  My suggestion is shop around before your lease comes up and then if you really don't want to move threaten to move and give them examples of what you could get in a comparably priced apartment.  I would not take double digit rent increases anymore with all the supply coming on line.  

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in the who is going to rent all these apartments question there is this:

""He said, when looking on a market basis, the best absorption is being seen in markets like Austin, Texas; Nashville, Tennessee; Phoenix and Charlotte, North Carolina, the same markets expected to grow their apartment inventory by 8% to 10% this year.

"... (T)he strong absorption is actually following where the construction is happening," he said, but added the second half of 2023 is expected to see so many unit deliveries, it'll likely mean softness in the Class A apartment market, especially in cities with a robust pipeline. That'll likely mean more aggressive concessions are on the horizon for Class A properties in those markets, Whitaker added.

Some 15% of apartments are offering concessions today, Whitaker said, compared to 50% or more in the wake of the global financial crisis.""

from an article by Ashley Fahey about the apartment market nationwide put out by RealPage 

https://www.bizjournals.com/charlotte/news/2023/04/10/us-apartment-market-rebounds-q1.html

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I cut & pasted this from the CBJ.  Seems like it could be a significant amount of Apartment’s developed.  Does anyone know where this would be at in  Mecklenburg?

Wilmington-based Tribute Cos. is seeking to rezone about 182.7 acres to allow the development of 1,950 residential units, a school and a public park. 

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I heard a conversation recently about a high end condo development in process. 409 Queens Road. Financing for project is a worry currently, as is true for almost everyone, commercial or personal. Five levels, I think, high end as one would assume. Prices for the units, 17 total as I recall, must be what one would expect for such an address that would require quality materials. These buyers would likely be coming with significant amounts of cash.  Still early in this game so things may change. If you are thinking of a new place for yourself in 2-3 years that will impress your in-laws this could be the one.

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41 minutes ago, videtur quam contuor said:

I heard a conversation recently about a high end condo development in process. 409 Queens Road. Financing for project is a worry currently, as is true for almost everyone, commercial or personal. Five levels, I think, high end as one would assume. Prices for the units, 17 total as I recall, must be what one would expect for such an address that would require quality materials. These buyers would likely be coming with significant amounts of cash.  Still early in this game so things may change. If you are thinking of a new place for yourself in 2-3 years that will impress your in-laws this could be the one.

it was called Echelon on Queens and the listings for presales have been withdrawn from the Multiple Listing Service so it seems marketing may have stopped. That was as of Dec. 2022.  It was priced from $1.4 to $3.6M and that is exceedingly thin market in Charlotte for condos.   There are 23 active listings in that price range over $1 M for condos in Charlotte.   Average days on the market is 167 days much longer than SF homes in that same range.   There is a market for $1 M plus condos in Charlotte but it is just very small. 

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Last time I checked (specifically, December) there were still multiple condos available at that infill condo project (called Opus, I think) at Queens & Providence and that thing was completed years ago. Those were all slightly over $1M iirc. Then there's this place in Eastover, still under construction, starting at $1.7MM and going to at least twice that.

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3 hours ago, SydneyCarton said:

I don’t know why they don’t build more condos in Charlotte.  It seems that there’s demand.

Charlotte is extremely gun shy after the spectacular failure of 3 condo towers prior to 2007.  That includes the Vue which converted to apartments midway through the sales process leaving a couple of people still owning units there and the rest is a apartment tower.  the unbelievable 50 story condo tower proposed at Epicenter where hundreds of people lost thousands of dollars in deposits   3rd tower problem was Pete Verna's condo tower where the Skye was and many people lost money there too.  Ultimately that is the only one ever completed to some condos and the hotel.    So only a few boutique small mid rise condos buildings have been built in Myers Park, Eastover and in the Lake Norman area.    I agree there is a market for a small number and I think our best bet is a hotel like a W with a few W Residences condos on the top floors.  

https://www.wcnc.com/article/news/local/epicentre-condo-developer-files-for-bankruptcy/275-374986845

https://www.condo.com/building/The-Vue-Charlotte-NC-28202-92925132  old webpage for the Vue condos for sale

https://www.wcnc.com/article/news/local/condo-developer-says-hes-bankrupt/275-374954427

so pin this post this why this market is  very uneasy with big condo towers taking deposits for buildings never built or never sold as condos. 

 

another way to get some condos is convert some or part of the apartment towers uptown into condos and slowly convert an apartment tower to condos.  

Meanwhile in Durham high rise 27 story condo and apartment tower rises right now.  

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