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The NC-CCIM 2015 Charlotte Commercial Real Estate Market Forecast Charlotte Multifamily Outlook.

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Presentation on theme: "The NC-CCIM 2015 Charlotte Commercial Real Estate Market Forecast Charlotte Multifamily Outlook."— Presentation transcript:

1 The NC-CCIM 2015 Charlotte Commercial Real Estate Market Forecast Charlotte Multifamily Outlook

2 Loans are subject to credit approval Grandbridge Charlotte  Multifamily Production 2014 » 24 Transactions » $500 million Loan Volume » 15 Lenders » Fannie Mae, Freddie Mac, FHA » 8 Insurance Companies » 2 Proprietary Lenders » 1 Bank » 1 CMBS

3 Loans are subject to credit approval Source: MBA

4 Loans are subject to credit approval Source: MBA

5 Loans are subject to credit approval Source: GBRE Estimates

6 Loans are subject to credit approval Source: GBRE Estimates Household Type Distribution (Occupied)

7 Loans are subject to credit approval Source: US Census Bureau, US BLS Charlotte Region Growth  Mecklenburg County Since 2008: Average growth of 24,000 people per annum +2.8%/annumNC: +1.13%/annumUSA: +0.78%/annum  Charlotte MSA Population 2003: 1,841, : 2,151, : 2,335, %/annum

8 Loans are subject to credit approval Source: US Census Bureau, US BLS Charlotte Region Growth  Job Creation Since 2009: Average of 11,350 new jobs each year WITHOUT: Significant new job announcements by banks Each new job is associated with an increase in population of 2.11 people Compensation: Q Average Annualized Wages: $71,000 –2009 Q1 Average Annualized Wages: $55,000 –+29%  Quality of jobs in Charlotte is improving

9 Loans are subject to credit approval Source: Charlotte Chamber; GBRE Estimates

10 Loans are subject to credit approval Source: GBRE Estimates What Does the Expected Growth Mean for Multifamily Demand? Average Mecklenburg County Household Size is % of Households are Renters …

11 Loans are subject to credit approval Sources: Carolinas Real Data; GBRE Projections

12 Loans are subject to credit approval Sources: Carolinas Real Data; GBRE Projections

13 Loans are subject to credit approval Charlotte Multifamily Housing Stock - Current Source: Carolinas Real Data Iredell County 111,981 units 6.7% Vacancy Rents up 0.5% last 6 months 5,120 units absorbed last 12 months

14 Loans are subject to credit approval Charlotte Multifamily Housing Stock – Pipeline – 2018 Source: Carolinas Real Data Iredell County 132,788 units (+18.6%)

15 Loans are subject to credit approval Selected Submarkets Overview Source: Carolinas Real Data East-1: NoDa, Plaza Midwood 8,414 units – 880 sf avg 8.0% Vacant $825/month ($0.94/sf) 1,292 U/C (+15.4%) 1,736 Proposed (+20.6%) Newest units avg 1% larger than existing stock Southeast-1: SouthPark, South End, Midtown 11,061 units – 961 sf avg 9.0% Vacant $1,244/month ($1.29/sf) 3,327 U/C (+30%) 2,356 Proposed (+21.3%) Newest units avg 14% smaller than existing stock Uptown: 2,532 units – 955 sf avg 14.1% Vacant $1,649/month ($1.76/sf) 1,060 U/C (+41.8%) 1,945 Proposed (+76.8%) Newest units avg 13% smaller than existing stock North: Northlake, Huntersville, Davidson 6,921 units – 993 sf avg 8.3% Vacant $987/month ($1.00/sf) 1,387 U/C (+20%) 1,111 Proposed (+16.1%) Newest units avg 5% larger than existing stock

16 Loans are subject to credit approval Housing Costs  51.5% of US Renter Households Pay More than 30% of Income in Rent $73,767 Average HH Income (2013) $52,250 Median HH Income (2013)  47.9% of Mecklenburg County Households Pay More than 30% of Income in Rent $80,917 Average HH Income (2013) $54,278 Median HH Income (2013)

17 Loans are subject to credit approval Points to Consider  Valuation – Cap Rates: A+ Mid- or High-Rise Product: Mid- to High 4% on Actual NOIs –Lower for Pre-Stabilized A Product: 5.00% % B Product: 5.50% % Perceived Value-Add properties are being priced very aggressively, so C products are compressing B cap rates while the search for yield continues to push cap rates down across the board. Not much impetus for cap rates increasing –Spread to US Treasuries remains above historical norms

18 Loans are subject to credit approval Points to Consider, continued  Valuation – Income: If rents are compressed through overbuilding or slouching demand, valuations would reduce, but cap rates likely to remain stable.  Capital Sources - Equity is abundant Fund investors’ yield expectations are adjusting downward Foreign investors moving in to the Carolinas from Europe including Russia, and the Middle East as geopolitical and economic risks in home regions magnify –Expected further Dollar strengthening –“Parking” money in US assets –CRE as an asset class gaining favor among all investor types

19 Loans are subject to credit approval Who Doth Not Answer to the Rudder Shall Answer to the Rock.

20 Loans are subject to credit approval Conclusions  “Launching” of adult children living with parents and subsequent household formation will drive multifamily demand in next several years  Negative savings rate and limited real wage growth will require more Millennials & Gen X’ers to rent versus own, but will also be a headwind to long-term capital availability  Homeownership rate of 64% trending down towards 60% over next decade  No single, definable risk to the U.S. economy, commercial real estate, or capital availability  Permanent lenders are beginning to ignore Loan-to-Cost in multifamily  Required seasoning periods have shortened  Pricing more attractive/competitive  Charlotte’s multifamily boom has room to run


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