Uptown Charlotte’s rental housing market looks like a paradox: It’s got the highest number of vacancies, but it’s also where developers are building the most new apartments.
That contradiction means that developers will be building more high-priced, luxury buildings inside the Interstate 277 loop even as they offer discounts and breaks on the rent to lure tenants to units that are already there.
But developers say they’re not concerned – yet. They expect new apartments to eventually get leased, as more people move to Charlotte and seek urban living among uptown’s new shops, restaurants, Whole Foods and Blue Line extension.
“The new towers are competing with one another,” said David Ravin, president of apartment company Northwood Ravin. The company owns the Vue and is building two apartment towers totaling almost 800 units uptown. “Certainly we are seeing softness... In the long term, it remains an attractive market.”
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Figures released this week by Charlotte-based Real Data show the apartment vacancy rate uptown is 21.8 percent. That’s the highest in the city by a wide margin, and more than three times the Charlotte market’s average. More than 1,100 uptown apartments are vacant.
Still, uptown commands the highest rent, by far, averaging $1,868 a month. At many of the new towers such as Ascent and Museum Tower, a one-bedroom apartment can run $2,500 or more a month.
And developers are planning more. Just last week, Dominion Realty Partners said it would build 215 luxury apartments in a high-rise shared with bank offices.
The number of uptown apartments has more than doubled since 2015. But with almost 1,700 new apartments on the drawing board, developers are set to increase the size of uptown’s market by more than one-third. That’s the biggest increase out of any Charlotte sub-market.
“I wouldn’t say there’s a red flag,” said Charles Dalton, principal at Real Data. He said the high vacancy rate is due to several new apartment buildings with hundreds of units all opening in a few months. “That vacancy is all in the new communities.”
More established apartment buildings uptown, Dalton said, have vacancy rates closer to the 6.9 percent average in Charlotte.
Let’s make a deal
To lure tenants, uptown apartment buildings have been turning to deals on rent.
SkyHouse, with 672 apartments to fill, is advertising two months free, as is newly opened Novel Stonewall Station. Ascent has an offer for a month free plus reduced rent, while Centric Gateway is offering two months free for renters who sign a 14-month lease.
Other buildings, including Crest Gateway and Post Uptown, are offering a month free, and Presley Uptown has $500 off the first month and one month free after that.
Developers said they’re not surprised by the surge in concessions, as such breaks on rent are known in the industry.
“It is in line with what we expected,” said Michael Tubridy, managing director of multifamily development at Crescent Communities. “People expect that will burn off.”
He said all 71 of the apartments finished so far at Novel Stonewall Station (above a new Whole Foods) have been leased. But the company still has almost 390 apartments after that to lease. Tubridy said he’s confident.
“We’ve had 40 leases in the last 30 days,” said Tubridy.
The Museum Tower opened last year above the Mint Museum. Kelly Dunbar, manager of developer Childress Klein’s multifamily division, said just under 60 percent of the 394 apartments are pre-leased and the building is about half occupied.
“We do continue to see good demand,” Dunbar said. “Traffic and prospects are good.”
But he said the rent giveaways are eroding apartment owners’ income, at least in the short-term.
“With the two months free rent, nobody likes that,” he said. Over the next few years, the pace of when new apartments hit the market – whether it’s in big chunks, or spread out after more apartments get leased – will largely determine whether those breaks continue.
“I certainly have concerns,” said Dunbar. “A lot of it’s about timing.”
Michael Smith, CEO of Charlotte Center City Partners, predicted the market will be fine.
“The feedback we continue to get from new projects is they're meeting or exceeding their (expectations),” he said. “We’re not concerned yet.”