Grubb Properties is poised to remake some of Charlotte’s most popular neighborhoods in a more urban image with a wave of apartment, office and mixed-use developments, while expanding aggressively into new markets such as Winston-Salem and Atlanta.
The Charlotte-based company came out of the recession with a plan to buy undervalued apartment properties and spruce them up. Since then, Grubb Properties has refocused on new development and office acquisitions.
Led by Clay Grubb, son of the company’s founder, Grubb Properties has made several splashy announcements this year. The company and a partner bought the 525 North Tryon office tower for $60 million in January. In July, Grubb restarted long-dormant plans to redevelop 12 acres along the streetcar line with 550 new apartments and additional retail space at the corner of Elizabeth Avenue and Torrence Street.
Last month, Grubb’s co-developer Novare said they will build a second SkyHouse tower uptown, adding hundreds of apartments and a new tower to Charlotte’s skyline. And Grubb, along with Foothills Capital, unveiled plans for a major mixed-use development with up to 450 apartments, to be built in what’s now the parking lot of its Park Road headquarters.
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“It’s a fun time to be in Charlotte,” said Grubb. The company is also buying and selling office buildings in Durham, building new apartments in Winston-Salem and other cities and opening an Atlanta office.
I sat down with Grubb this week to get his thoughts on the city’s development. The conversation has been edited for length and clarity.
Q: What projects or trends are you most excited about working on in Charlotte?
A: We’ve been buying office buildings and developing multifamily. Now we’re bringing those two disciplines together here on Park Road as well as up at SkyHouse, where we’ve got 525 North Tryon.
Especially with today’s generation...in many of our new urban communities, we’re seeing dust an inch thick on cars, where people are living in our Link apartment communities and walking to work...They just don’t use the car at all. This generation would prefer not to own a car.
This millennial generation is coming out of high school and college, trying to figure out where to live. They want to live in urban areas. It doesn’t have to be New York City. In fact, it can’t be New York City because there’s no place to live and they can’t afford to live there.
Q: There are more apartments under construction in Charlotte than ever before, and you’re planning to build hundreds more. Are you worried about oversupply?
A: The apartment-building boom is probably going to cap the growth of the high-end residential. We’ll see that growth in rent decelerate because of that building, but I don’t think we’ll see it decline, because there’s just so much demand. Right now, you’ve got virtually every apartment community in the U.S. full. You’ve got the biggest generation in the history of the U.S. coming out of high school and college.
You’ve got 16.5 million of these millennials living at home with their parents. At some point they’re going to create their own households. We’ve got a severe supply shortage.
The real sad part is the workforce housing part of the rental pool is going to see an accelerated growth in rent, and that’s going to start really put a lot of pressure on our working families. It’s going to be a real problem in the U.S.
$938Average rent in Charlotte this year
$708Average rent in Charlotte five years ago
Q: Charlotte is being hard-hit by rising rent, especially as older apartments are torn down for new, luxury buildings. What should be done about that?
A: The worst thing you can do is push back on the supply and make the creation of supply harder. The easier you make the creation of supply, the more competitive the rents will be. So I think to address some of that you definitely need to focus on incentives, whether it’s easier building standard codes or whatever to encourage renovations.
It’s always tough when you lose some older product, but a lot of times obsolescence does creep into these projects and there’s just no way to salvage it.
Q: You’ve announced a major apartment and retail project on Elizabeth, but still have more land there. What’s next?
A: We’re kind of wrestling through the vision and the timeline of how we create it. It’s fun to see. I was opposed to the streetcar starting to operate before it went to Johnson C. Smith. I couldn’t figure out who in the world would ride it from Presbyterian Hospital to the arena, because you can walk it, almost.
So it’s exciting to see people riding it. I took my daughter and her friends to a football game. We walked over to the arena, got on the streetcar and went to Elizabeth Creamery. I think once it connects to Johnson & Wales and JCSU, you’ll really see those college kids having access down Elizabeth Avenue to restaurants.
We’re very focused on the restaurants. We’re talking with CustomShop about potentially a second concept on the street. We’re looking at how we can reuse some of the existing buildings, as well as supplement them with new concepts.
I think Elizabeth Avenue’s day has come. We thought that was the case in ‘06 when we built the streetcar tracks. Then we all know what happened in ‘08, right as we were breaking ground on two, 1,200-space parking decks.
Q: Are you planning to build those parking decks now?
A: They’ll probably come back in smaller iterations, which I think will probably be more tasteful and more community-oriented. I think we were all thinking big back then, and big isn’t always best.
Q: So what are you looking at building on that corridor after the apartments?
A: The retail and multifamily are gonna be your primary drivers, no question. We would love to do some office there. It’s a great location for law offices. You can walk out the front door, hop on the streetcar and get to the courthouse, and not have to battle parking at the courthouse. And obviously medical will always be in high demand right there, with the hospital.
Q: Are you finding it easier to access the capital markets and get financing for new projects now that the recession has faded a bit from memory?
A: The capital markets are moving in the right direction. They obviously have opened up for multifamily But it’s interesting: We’re starting to see some of the really sophisticated investors closing down their multifamily.
Northwestern Mutual Life was out of the market for about 18 months, which was unheard of. But they were one of the most active investors early on, so they’re going to reap the benefits. New York Life, UBS are all saying ‘Hey, we’re throttling back on multifamily.’ It’s not so much that anyone thinks supply and demand are going to get out of balance, but there’s just not going to be the rent growth, because of that supply. I think you’ll still see all the supply get full.