Since the recession ended, Charlotte-based Crescent Communities has waded back into development and started a half-dozen high-profile projects in the Charlotte area. But Crescent isn’t, for the most part, building master-planned suburban communities anymore.
Now, the developer is building a mixed-use hotel, apartment and Whole Foods complex on Stonewall Street uptown. Crescent is finishing apartment complexes in SouthPark and Dilworth, planning a mixed-use development in the hip NoDa neighborhood and a flashy new office tower on South Tryon.
The developer is following a trend toward more urban sites and apartments, places where buzzwords like “place-building,” “walkability” and “transit-oriented” are a lot more prominent than the old white picket fence.
It’s a big change for Crescent, which started out as a timber and real estate management company for Duke Energy’s landholdings. Known for its luxury waterfront communities such as The Sanctuary on Lake Wylie, Crescent filed for bankruptcy in 2009, hobbled by falling real estate prices and debt. The company emerged in 2010 and re-branded itself from “Crescent Resources.”
I talked with Brian Leary, Crescent’s president of commercial and mixed-use development, about why Crescent is building its mix of projects. Leary, whom Crescent hired in September, also told me why he’s so bullish on Charlotte.
On why he thinks Charlotte’s growth will continue: “There’s no dead body in Charlotte,” said Leary, describing the city’s rebound from the recession. “There’s no empty building that’s kind of left over from the financial malaise. It’s kind of the opposite.”
He points to many of the factors that others cite when they’re talking up the city: American Airlines’ second-largest hub, with more than 700 flights a day, the influx of millennials, the region’s growing population. Another factor, Leary said, is that big markets such as New York and San Francisco have grown so pricey it’s hard for investors to make money.
“It’s so competitive,” said Leary. “They’re starting to look at: Are there places that are better to invest for them? That’s why Charlotte actually punches above its weight.”
Investors in buildings in first-tier markets might see a 3 percent to 4 percent rate of return, Leary said. In Charlotte, they could get 6 percent.
On whether Charlotte is building too many apartments: Charlotte is building more apartments than at any time before, with more than 10,400 under construction and a similar number planned. Experts who track vacancy rates say they could rise from 6.7 percent to 8 percent as new apartments are finished this year. Crescent is building more than 600 apartments in SouthPark and Dilworth, and planning 750 more in NoDa and uptown. Leary said the possible rising vacancy rates aren’t a problem.
“If I knew I could build an office building and basically be at 92 percent, there would be a lot more office buildings going up right now,” said Leary. And apartments can be flexible, adjusting rents to attract tenants, as long as more people keep moving to Charlotte.
“If I have a big, empty office building, I can’t lower rents if there’s no business to come in,” he said.
So what worries Leary about the apartment boom? Quality. While Leary said the number of apartments isn’t a problem, he said builders need to be wary of cutting standards to get buildings done.
“I would be worried about the quality of what’s getting built,” said Leary. “When there’s a race to take advantage of the market, building to take advantage of trends, you get a bit more in a commodity mode over a quality mode.”
Leary said Crescent is putting high-quality finishes in its new projects, such as granite counter tops and stainless steel appliances, and building them to a standard of “condo-ready.”
“We think it’s a quality issue people will pay for, and they are,” he said.
On why Crescent is focusing on urban, infill and mixed-use projects: “We were still so suburban, master-planned, community-focused before,” said Leary. He said Crescent is responding to where people want to live.
“I think what people want is greater flexibility and choice with transportation,” said Leary. “Urban doesn’t mean high-rises. It means close together and walkable. They might want to bike, take a light rail.”
Despite the shift, Leary pointed out the company is still building suburban communities, such as Masons Bend in Fort Mill. But he said such communities will increasingly have more “urban” features, such as a walkable core with shops and cafes, rather than just houses.
“We’re not the ones to say, “Hey, everyone’s moving in town, the suburbs are going to disappear,” said Leary. “Most of America lives in the suburbs.”
On how Crescent, planning a mixed-use development in the hip NoDa neighborhood, will avoid angering residents even as music venues such as the Chop Shop are displaced: “When you start something like that, it requires more. You can’t just throw something up,” said Leary. “You can’t just take what you did in SouthPark and put it in NoDa.”
Leary said Crescent is making an effort to integrate the local arts community into the building and working to get a more local, boutique grocer to anchor the retail portion of the project. So far, the efforts appear to be paying off: While some neighbors spoke out against the development in online forums, no one showed up to protest Crescent’s plans at a City Council hearing last week.
On Tryon Place, the 27-story speculative tower planned at Tryon and Stonewall streets: Leary said Crescent is still planning to start construction on Tryon Place this year, with utility relocation to be followed by full-scale site work. The tower is the third planned uptown: Spectrum is building a 25-story office building at 300 S. Tryon, and Portman is planning to build a 19-story tower at 615 S. College St.
“We have tremendous interest,” he said. Leary said that while no one has signed on yet, Crescent is meeting with potential tenants. “I don’t have any leases signed yet. We had a great dinner with the decision-makers on 45,000 square feet the week before last.”
Crescent also plans to hire someone to lease the retail space in the tower as well. “No one’s said we’re crazy yet, so that’s a good sign,” said Leary.
Ely writes about growth and development at charlotteobserver.com/business. Follow him on Twitter at @ESPortillo. Send him news tips and feedback at firstname.lastname@example.org or 704-358-5041.