New numbers from a research company are confirming what anyone can see in a drive around Charlotte: Apartment construction in the city is at an all-time high.
Some in the real estate community say Charlotte might be on the verge of an apartment market bubble. But apartment complex builders say strong job growth and a rising population will keep the market thriving.
A new report from research firm Real Data tracked activity in Charlotte’s multifamily market over the past six months and found 10,067 units under construction. Most of the new units are in uptown and in neighborhoods such as South End, SouthPark, NoDa and Elizabeth. An additional 11,003 units have been proposed.
The units under construction mark the most apartment-building Charlotte has ever seen, according to Charles Dalton, principal at Real Data. The previous high came during in 2000, he said, when just under 8,000 units were under construction.
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The city over the past five years has averaged 4,479 units under construction, so the latest figures show the multifamily development market has yet to cool down, despite concerns in some quarters that it might be getting overbuilt. The Real Data report says that as the newest units hit the market in the next year, vacancy rates that currently sit at 6.2 percent will rise to as much as 8 percent.
Critics say developers who couldn’t get money to build condos or single-family homes during the recession are bingeing on apartment construction since banks have been more likely to lend for multifamily projects.
“I think we’re kind of overdosing on the apartments,” said Wendy Field, who develops townhomes for sale. “If you just drive around Charlotte you can tell. There’s just so many apartments. It’s hard to think there’s enough people to justify” it all.
She believes Charlotte’s apartment market could see a downturn similar to the recent real estate bubble if rental rates don’t keep performing well enough to keep banks and other creditors happy.
Apartment developers disagreed.
Spectrum Properties broke ground last week for The Mint, a new 177-unit luxury apartment complex across West Fourth Street from the new BB&T Ballpark.
Spectrum President Steve McClure said apartment construction slowed to a crawl during the recession, so growing numbers of Generation Y residents are entering young adulthood in need of a place to live but are unable to qualify for a home loan.
“All of those things together add up to boom time” for apartments, he said.
Ben Collins, a vice president with Crescent Communities’ multifamily unit, agreed. Crescent broke ground Thursday on its 296-unit Crescent Dilworth project near the Little Sugar Creek Greenway.
“I don’t see a bubble,” he said. “Places like Charlotte are attracting young people at an extraordinary rate.”
Mecklenburg County’s population topped 1 million last year, according to estimates from the Charlotte Chamber. The population grew by 32 percent between 2000 and 2010; the corresponding figure for the nation was 10 percent.
Job growth has also been relatively strong.
State data released last month showed the Charlotte-Gastonia-Rock Hill area logged the largest net year-over-year employment increase in the state with 22,600 jobs, a gain of 2.6 percent.
McClure said Spectrum, too, is betting on the city’s positive demographic trends. He’d like to build more complexes here, he said, provided he can find the right parcel in an under-served area.
“You are going to have some overbuilding,” he said, “but if you plan it so you’re in markets that are going to be good 10 years from now, you’ll be able to ride out that blip and continue to be successful.”
The Real Data report says rent growth – the average increase or decrease in rental rates at existing complexes – will slow as new communities open and compete for renters.
Collins said the influx of new apartments isn’t surprising or alarming. He believes that as the new complexes drive vacancy rates higher, construction will slow down, the existing units will be absorbed by the market, “and we’ll be just fine.”
The average rent in Charlotte stands at $874 per month, with one-bedroom units going for about $781, two bedrooms going for $891 and three bedrooms renting for about $1,029.