If Charlotte’s real estate boom were a baseball game, the general consensus seems to be we’d be somewhere between the seventh inning stretch and heading for the stadium exits.
That’s what a panel of experts concluded at the annual Charlotte Commercial Forecast, hosted Wednesday by the North Carolina Chapter of the CCIM Institute at Carmel Country Club. While they agreed that 2016 is likely to be another good year, all kinds of uncertainties – from the presidential election to the state of China’s economy to interest rate hikes in the U.S. – could derail the local real estate market beyond that.
“We’re somewhere between the seventh and the ninth inning,” said Mark Vitner, Charlotte-based economist for Wells Fargo. He was trying to quantify where Charlotte is in the real estate cycle before the next bust hits.
I think 2016 will be good, but we’re peaking.
Louis Stephens, managing director at JLL.
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Local economic indicators are mostly positive. Apartments are under construction at a record pace in Charlotte, with about 25,000 either planned or underway. Office buildings are being built from uptown to Ballantyne, and the $284 million sale of One Wells Fargo Center that closed last week set a new record as the most paid for an office building in the state. Home prices are rising, and jobs growth continues in Charlotte.
But we’re already deep into this booming real estate cycle by historic standards, and Vitner said a recession is likely in the next two years. After all, they tend to coincide with a new president’s first year in office, and this election is more unpredictable and acrimonious than most.
“I think we are in the seventh to ninth inning,” said Louis Stephens, managing director at JLL. “Maybe the eighth.”
Despite the surge in prices for office buildings, Stephens said the market is showing signs of a cool-down. The Wall Street Journal reported last month that sales of commercial real estate nationally plunged in February compared to a year earlier: Just $25.1 billion worth of transactions, vs. $47.3 billion a year ago.
“I think we’re peaking,” said Stephens. “We’re starting to see some buildings fall out of contract, which we didn’t see last year...I think 2016 will be good, but we’re peaking.”
Mike Ortlip, senior vice president at Grandbrdige Real Estate Capital, said a recession would of course have local impacts. But with people and companies still moving to Charlotte at a rapid clip, he said the city has more resilience than a declining market.
“As the country goes, we go,” said Ortlip. “But it will be less severe.”
The clouds on the horizon get murkier the farther ahead forecasters look. Beyond the first half of 2016, risk factors multiply: The Fed could hike interest rates, there could be a major terrorist attack, the world economy could slide into a full recession.
“If you’ve got something that can get done in the first half of the year, I’d encourage you to do it,” said Vitner.