Commercial real estate developers hoping for a better 2024
There are about seven more weeks left in 2023. But some are already looking ahead to 2024. And I’m not talking about next year’s elections, but rather the state of commercial real estate in Charlotte. For more, we turn now to Tony Mecia of the Charlotte Ledger Business Newsletter for our segment BizWorthy.
Marshall Terry: All right, Tony. We've heard about high interest rates and labor costs. It's been a rough year for a lot of real estate folks. What are those who watch these sorts of things looking for going into the new year?
Tony Mecia: Yeah, commercial real estate in the Charlotte area and around the country this year, Marshall, it's been a lot slower. It might not seem that way. There's still apartments being built all over town, all over the region, really. So that's definitely true.
But if you look at the numbers, like I did last week from CoStar, which provides real estate data, it showed that the Charlotte region is on pace in 2023 to start the fewest number of apartments since 2019, and start the smallest square footage of offices since 2014. And also the square footage of new retail restaurants, they're also at their lowest point in about 10 years.
For 2024, you know, nobody really has a crystal ball. I think a lot of folks in commercial real estate are hoping that the interest rates will go lower, that the banks will lend in ways that they were before, and get some of these projects that have been delayed for a while back on the drawing board.
Terry: But don't we often hear how Charlotte's population continues to grow and more people keep moving here? Where are they going to live and work if stuff is not being built at the same pace it was?
Mecia: Yeah, that's a good question. You know, the last couple of years, 2021 and 2022, there were a record number of apartments that were started. So some of those are going to be coming online. It usually takes a couple of years to build apartment complexes, so those will be available. It is definitely true, there are more people moving here. There are still apartments being built. I think some questions going forward about, you know, what is the pace of that new construction going to look like? And, you know, what are rents doing — there's some new figures out that suggest that rents actually are starting to dip, as well, just because the market for a lot of these luxury apartments maybe is not as strong as it used to be. And it's a question of supply and demand.
Terry: Sticking with real estate for a moment, you report Charlotte real estate agents are closely watching a court case that's playing out in Missouri. What's going on, and why do real estate agents here care?
Mecia: Yeah, it's sort of interesting, you know, for a long time, if you've bought or sold a house, you've probably dealt with real estate agents. And there's a court case in Missouri that really looks at the way real estate agents are compensated. And it suggests that the current system might be in violation of antitrust law — because the way it works is, typically when you are selling your house, you pay a commission to your agent on the sell side, and then the sales agent pays the buyer's agent a part of that commission. So the theory is that that's sort of collusion, anti-competitive practice, and that it raises the prices of housing, as well as makes it difficult for buyers and sellers to negotiate those commissions with their agents. And so it kind of suggests there could be some changes coming in how agents are used to buy and sell houses.
It could result in lower fees. It could result in completely different ways of buying and selling houses. I talked to some local real estate agents, a mix of views, really. Some say the current system does a good job protecting consumers, and they also say that in the Carolinas there are agreements that fully disclose to people who are buying and selling houses exactly how the agents are compensated. But it does look like there could be some changes coming that could kind of shake up that industry, Marshall.
Terry: Let's end this week with an update to something we talked about last week, and that is parking at Charlotte Douglas going up. Since we last spoke, it's become clear the airport has also raised prices for online parking reservations. By how much?
Mecia: Well, it varies based on the type of lot. You know the airport did say a couple weeks ago that it was raising parking prices. It said at the time that those only applied to drive-up rates, and they encouraged everybody to go online to book the parking ahead of time because they said it's cheaper. But while that's true, the rest of the story is that those online parking rates have also gone up. So we're talking about a maximum of $12 a day for long term, $20 a day for the daily lots.
In some cases, if you book online, you can see the savings of a few dollars a day. In some cases, it's as little as one cent a day. And they do use dynamic pricing, so there's not really a set price for the online reservations, Marshall. But they do say, yes, the prices can be cheaper if you book online — but they're definitely up from where they were a couple of weeks ago as we're heading into the holiday season.
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