Luxury Apartment Market Sizzles

Steady job growth, including corporate relocations and hiring in recent months, have piqued investor interest in high-end Charlotte apartments even more than at the beginning of this year, ARA principal Blake Okland tells us. (Don't discount the influence of a warm sun, either.)

That's because the quality of the new jobs is driving average incomes upward, and as incomes grow, demand for better dwellings increases, especially new product. Infill luxury projects completing construction this year report strong leasing velocity and high rent levels, Blake says. These strong rents have a positive trickle-down effect for owners of A, B, and C properties, who now have more pricing power across the product spectrum. Rental growth is at a steady pace throughout the region, and in Charlotte in particular, he explains.

Last week's Sealed Air Corp's decision last week to move its HQ to Charlotte is a good example of the trend, bringing about 1,300 jobs to the area from New Jersey, Connecticut, and Wisconsin, most of them white collar. Some $36M in incentives helped the plastics specialist, which makes Bubble Wrap among other things, make its decision. (We can't begin to describe how cool it is to have the maker of Bubble Wrap in this town.)

Also driving demand for apartments locally, Blake says, is an increased propensity to rent, even among those who can buy. Recently Blake and colleagues Dean Smith, John Heimburger, and Sean Wood repped Denver-based Simpson Housing in the sale of the 277-unit Arboretum Apartments in South Charlotte. The Connor Group acquired the late '80s property, which is 98% occupied, for $32M. Dean says the property has walkability and a low- density site plan that “cannot be replicated today.”

Lord Aeck Sargent's Mark Lange: Designs For Charlotte

Lord Aeck Sargent principal Mark Lange likes a challenge, and in our business that means doing complex, mixed-use projects in transit-oriented urban areas. He started his architectural career in bustling Houston before moving on to Atlanta for game-changing office buildings, hotels, and multifamily work. Mark designs projects in cities across the Southeast and he says a key to taking Charlotte to the next level is public transportation (a serious appreciation of light rail and streetcar trolley lines, for starters). He says the definition of “Uptown Charlotte” is broadening and is no longer simply focused on the financial center—and dependable mass transit will energize that expanding urban fabric. Mark adds that complex mixed-use adds big value to any community, and car-shunning Millennials are calling the future shots, which are purely pedestrian. When it comes to taking Charlotte to tomorrow, keep an eye on Mark. For more info on our sponsor, Lord Aeck Sargent, click here.

Investors Hot for SC

South Carolina has also been discovered by investors looking to drill deep into secondary and tertiary apartment markets. That's for similar reasons as Charlotte, MHA managing director Jordan McCarley explains (right, snapped with colleague Marc Robinson): market fundamentals remain solid and financing options for multifamily assets continue to improve. He anticipates “tremendous investment activity” in South Carolina multifamily well into 2015.

Charlotte-based Jordan and Marc recently repped the sellers of four apartment properties in South Carolina for a total of $39M, all of which attracted a lot of attention from bidders, Marc notes. The deals included Covenant Capital acquiring the 246-unit Century Forest in Greenville from Centennial Holding Co for $19M (pictured), Hudson Capital buying the 120-unit Fox Run in Camden for $10M from Pulliam Investments, and PRG Real Estate selling a two-property portfolio in Spartanburg to Graycliff Capital for $10M.

Investors Get Busy with Net-Lease Deals

One more thing investors are hot for in Charlotte: net-lease properties. Franklin Street Real Estate Services director Bryan Belk tells us that recently he repped both the buyer and the seller of a Dunkin' Donuts-leased property in downtown Charlotte, receiving a dozen offers in 48 hours for the property at 701 S Kings Dr across from Presbyterian Hospital, which still has 10 years to run on a 20-year lease. There was that much interest despite the property's 5.5% cap rate, which he says is the lowest he's seen for a Dunkin' Donuts property.