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Growing Up, Growing Out

Lumber costs, pandemic can't slow apartment development in Charlotte.

By Ashley Fahey – Real Estate Editor, Charlotte Business Journal

May 14, 2021, 7:10am EDT

Marcie Williams saw new leases rise 30% last summer after the early days of the Covid-19 pandemic stalled business for two months at RKW Residential. The firm manages about 8,500 apartments in Charlotte.

More recently, at the newly built Solis City Park near the old Charlotte Coliseum site off Tyvola Road, RKW signed at least 58 new leases in April — a company record, said Williams, RKW president. A good lease-up month sees 30 to 35 new leases signed, she added.

It’s quite a turnaround from last spring. Property managers and landlords implemented virtual tours, closed down property amenities and wondered whether a teetering economy, mass layoffs, furloughs and reduced hours would hit rent collections.

The industry did see fewer on-time rent payments and an increase in concessions. But the start of the new year saw steady improvement. In-migration and a tight housing market are bolstering the outlook.

Now, Charlotte’s apartment market is poised for a strong post-Covid recovery. In fact, according to many metrics, the industry is already seeing a big rebound.

Apartment rent nationally is seeing year-over-year growth, said Adam Couch, market analyst at real estate software and data analytics firm RealPage. “We think there’s a lot of good tailwinds for the apartment market overall, and that will only improve as the overall economy continues to improve,” Couch said.

Between the start of the fourth quarter of 2020 and the end of first quarter of 2021 — winter months that are typically slower for the for-sale and rental housing markets — the average apartment rent in Charlotte increased 3% to $1,234, RealPage found. The current spring and summer months, the prime leasing season, are expected to build on that momentum.

The Charlotte metro could see nearly 10,900 apartments deliver in 2021, which would be a multidecade high, Couch said. That expected surge in inventory may moderate rental rate growth but, Couch said, he doesn’t expect the market to be oversupplied.

“It would be a concern to me if it was a market like New York or the Bay Area, where you’re seeing a lot of net move-outs, but there’s a lot of people moving to these Sunbelt metros,” he said.

Here’s what’s driving the apartment market in Charlotte.


Some of the most ambitious projects underway or in planning by Charlotte-based Proffitt Dixon Partners are in the suburbs.

In Matthews, the developer recently built the 258-unit Fountains Matthews project. It’s also starting to deliver the first phase of Briley, entitled to include 570 residential units, both traditional market-rate apartments and senior housing, and up to 150,000 square feet of commercial space.

The hope is that Briley will set a precedent for a similar mixed-use project in the proposed Caroline development near downtown Cornelius. There, Proffitt Dixon is seeking town approval to build up to 250 units of senior housing, 110 apartments and 95,000 square feet of commercial space.

Developers like Proffitt Dixon increasingly building in the suburbs are picking sites close to amenities like restaurants, offices and recreation.

“Our whole goal in working on (Briley) was to be something that could be a complement to what the town has created in downtown,” said Wyatt Dixon, managing principal at Proffitt Dixon Partners. “It will definitely, we think, set a new level of quality in the Matthews submarket.”

During the pandemic, many apartment operators in Charlotte say their suburban properties overall fared better than urban communities. And rent growth in suburban submarkets in the past year has outpaced Charlotte averages.

The submarket of Fort Mill, Rock Hill and Indian Land, for example, saw 5.9% rent growth between March 2020 and March 2021, compared to 3.6% market-wide, according to RealPage and AXIOMetrics data. The Concord, Kannapolis and Salisbury submarket saw 5.6% growth in the same time period and, in Huntersville and Cornelius, rent rose 5.4%.

“As we went through Covid, there was a flight to high-quality suburban nodes, with good schools (and) high-quality, Amazon-resistant type of retail,” said Kevin Kempf, executive vice president at CBRE’s capital markets group. “There were some lifestyle decisions that families and individuals made in 2020 that, I think, really helped fuel the growth in those suburban nodes and strong rent growth.”

Marc Robinson, executive vice chair of Cushman & Wakefield’s Sunbelt multifamily advisory group, said investors right now have a preference for suburban properties, primarily because they perceive more opportunities there for rent growth.

Still, Robinson added, there’s a significant amount of capital that wants to acquire urban assets.

In fact, several apartment properties in urban neighborhoods like South End and Optimist Park have traded, including to institutional capital, in 2021.

Williams said the Centro Railyard project in South End — where units average 475 square feet — delivered and leased up during Covid-19. It sold to Collett Capital and equity partner Spaulding & Slye Investments at nearly 100% occupancy in February.

“Our infill communities have not emptied out while our suburban properties have filled up,” Williams said. “People still want to be in the center of it all.”

Ram Realty Advisors, headquartered in Florida but with an active development pipeline here, has bet big on urban neighborhoods in Charlotte. Its next apartment projects are on West Tremont Avenue in South End and Gesco Street in west Charlotte.

Although Ram continues to bet big on urban nodes, the developer is looking at some suburban opportunities, said David Klepser, the firm’s vice president of the Carolinas.

“As you’re starting to see more renters-by-choice or folks who are making the decision to live in rental housing (who want) to access the right neighborhood and to be in a good school district, to be near the parks and recreation for their kids — we think there could be an opportunity there going forward,” he said.


Skyrocketing lumber pricing has created new headwinds for an industry that regularly has to navigate rising construction costs.

Sawmills shut down or operated on reduced schedules during the pandemic. But demand did not subside. In most places, Charlotte included, construction was considered an essential business and never stopped.

Add in a boom in DIY projects as people stayed home, and supply has yet to catch up. The result? Home prices and, eventually, apartment rents will see surges in the coming years.

Lumber futures for May delivery were $1,500.50 per thousand board feet on May 1, an all-time high, according to The Wall Street Journal.

Both homebuilders and apartment developers are having to go back to the drawing board on their projects, adjusting their pro formas to make deals pencil out.

“You have to pass these costs along with the end uses,” said David Ravin, president and CEO at Charlotte-based Northwood Ravin. “That’s what’s happening with home prices; that’s what will happen with apartments. The market’s either going to continue to pay for it or it won’t.”

In the coming weeks, Northwood Ravin will start delivering units at three Charlotte developments: 500 West Trade in uptown, Towerview at Ballantyne in Ballantyne Corporate Park and its first all-rental townhouse project, Townhomes at Bridlestone, in Pineville.

Lumber pricing won’t necessarily affect rents at those projects because much of the construction was already underway when the pandemic hit. But with future projects, Ravin said, it will likely have an impact.

Ian Wagoner, managing director of Carolinas multifamily at Charlotte-based The Spectrum Cos., said the firm has never been more educated on the lumber market than it is today. The firm has two apartment projects under construction in Charlotte: a 303-unit development at South Mint Street and Carson Boulevard, between uptown and South End, and a 325-apartment project in University City.

“We’re trying to get creative in how to account for increases in lumber,” he said. “We’re not sitting on the sidelines and hoping it will go away.”

Ravin said project costs are tracking to be 15% higher — possibly more — than pre-pandemic because of the rising price of materials as well as labor.

Dixon said a Class A suburban apartment project might have run about $130,000 per unit in 2018 in construction costs. The exact same project would now cost about $170,000 per unit.

Shortages run throughout the building process: Deliveries for appliances and light fixtures are frequently delayed, and PVC pipe and steel have been affected by cost increases.

Locally, a recent regulatory change for residential and commercial projects is also creating higher costs, some say.

Mecklenburg County code enforcement in 2019 began inspecting water-distribution systems, previously under the purview of Charlotte Water. The county says, unlike the city and N.C. Department of Environmental Quality, it only has the authority to enforce state building, electrical, mechanical or plumbing codes. That’s meant a change in materials available for developers to use for new water pipes. State plumbing code doesn’t include C-900 PVC pipes — a popular choice in the industry — as an approved material.

Kim Graham, executive director of the Greater Charlotte Apartment Association, said developers are increasingly opting for ductile iron pipes instead, to conform with code. But that can double, triple and sometimes quadruple costs. She said developers may be offsetting those increases with higher rents, putting pressure on affordability.

“Some of these developers who this is really putting the squeeze to may be the ones who are trying to make sure affordability is top of mind,” Graham said. “They have very little to no wiggle room on the math on deals.”


Even though several transactions were put on ice in the second quarter of last year, capital markets activity for apartments in Charlotte ended on a high note.

Apartment sales volume here was $3.5 billion in 2020, compared to nearly $3.7 billion in 2019, according to CBRE.

Institutional investors are paying closer attention to Charlotte and other Sunbelt markets, betting on a strong rebound in a post-Covid-19 world. And groups that have historically not been apartment investors are entering the space for the first time.

Robinson said the third and fourth quarters of 2020 had some of the frothiest capital markets activity he’s seen in some time. Apartment sales scheduled to close in the early part of 2020 were put on hold but didn’t ultimately get canceled, he said.

Pricing remains strong, and capitalization rates have come down in the past 90 days with increasing interest rates, Robinson added.

“Many of the transactions occurring are continuing to set or break records,” he said. “It’s been an environment where, in both the suburbs and urban areas, we have seen trades that have exceeded historical pricing thresholds.”

Looking ahead, market watchers expect investment activity to remain high, particularly in the second quarter and into the third quarter.

Kempf said more debt funds and bridge financing have recently emerged as capital sources for multifamily deals.

“The competition among lenders is continuing to provide a very favorable financing environment for multifamily,” Kempf said.

Couch said Sunbelt markets are expected to continue to attract new investors, compared to some of the gateway markets. That’s created stiff competition for assets listed on the market, as well as some off-market deals.

Investment volume should remain robust through the rest of 2021.

“If you’re sitting on the sidelines waiting for some discounts to happen, you’re probably going to miss an opportunity,” Couch said. “Cap rates continue to compress, pricing remains high, volume is robust. Investment activity is in good shape, and that will only improve as we move ahead.”


About Ram

Ram Realty Advisors LLC acquires and develops retail, multifamily, and mixed-use properties in select high-growth markets throughout the Southeast. The investments are capitalized by Ram-sponsored discretionary private equity funds and institutional co-investment vehicles. Since 1996, Ram has deployed in excess of $3.2 billion of capital. Ram and its predecessor entities were founded in 1978. The Company is headquartered in Palm Beach Gardens, Florida, and has offices in Charlotte and Chapel Hill, North Carolina.

Media Contact

Kelly Owens

Alchemy Communications Group

office: 561.935.9953 x. 101

mobile: 561.222.4958

Jennifer Stull

Ram Realty Advisors

office: 561-630-6110


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