EDR PRISM Event

1. Market Update:
Charlotte Edition
May 3, 2017

2. Are we growing?

3. Moving to North Carolina?
• Interstate moves
increasing, but haven’t
eclipsed pre-Recession
levels
• NC has more than one
decade of in-bound moves
outpacing outbound
• Historically, Washington
DC, North Carolina, and
Texas have had the
highest shares of inbound
moves

4. Charlotte MSA Growth
• Approximately 57,300 new
households; 6.7% increase
• 55% growth in Mecklenburg;
not just job center for region
• York Co. surpassed Union Co.
for second-fastest growth
• Some suburban counties
struggling for jobs and
commercial tax base to pay for
household growth and schools

5. Net Migration
• More than 100 people
move to Charlotte MSA
every day
• Five-year average of
~16,000 net new people
per year into Mecklenburg
• About 40% move to area
for new job, a relocation or
to seek employment
• High share young
professionals seeking work
out of college
74,706 moving in
58,818 moving out

6. What jobs are we attracting?

7. North Carolina Job Growth

8. Charlotte MSA Job Growth
33,800
38,495
22
-58,277
-15,038
28,705 28,214 27,146
36,831
42,453
-80,000
-60,000
-40,000
-20,000
0
20,000
40,000
60,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
AnnualNetJobGrowth
Annual Net Job Growth, Charlotte MSA, 2005-2015

9. Charlotte MSA Job Growth
• Total MSA growth of 164,000
jobs, or 17.7%
• Higher than 9.1% gain nationally
• Mecklenburg County led with
102,700 net new jobs; growth
equated to 62.9% of total regional
increase
• Lincoln and Rowan reported the
slowest growth rates; more
heavily impacted by
Manufacturing losses

10. Strong Technology Growth
• Historically, banks over
‘bots
• Tech businesses
expanded job count by
18% 2014-2016;
fastest in US
• Metro experienced
23% workers in STEM
in last decade

11. What is (still) driving demand
for apartments?

12. Apartment Demand Drivers
• Household increases
• Job growth
• Improving wages and
household formation
• Proximity to…
• Transportation options

13. Housing Affordability
• Nationwide, the share of income spent on a mortgage is well
below historic norms, while rents affordability has decreased
• Charlotte is comparably more affordable that the national average
• Consider impact on relocation decisions, especially for young
professionals with school debt

14. Charlotte’s Rental Market
7.3%
11.8%
13.6%
9.0%
6.7%
6.2%
6.2%
6.1%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
-2,000
0
2,000
4,000
6,000
8,000
10,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
VacancyRate
Units
Net Change in Inventory Net Absorption Vacancy Rate
Apartment Market Performance, Charlotte Region, 2006-2016
Vacancy
0.1%
Rent Growth
4.0%

15. Charlotte’s Rental Pipeline
• Pipeline remains strong
• 11,974 units under
construction
• 13,938 units proposed
• Downtown is one of the
most active with more
than 2,000 units
underway
• Other hotspots include
the Southwest, East, and
York County submarkets

16. Is our office space competitive?

17. National Trends in Office Space
• Compact, walkable
places near housing and
public transit
• Space/employee on a
long-term decline
• Open floor plans
• Fewer offices
• Less on-site paper
storage
• Telecommuting on the
rise nationally

18. Charlotte’s Office Inventory
• Downtown Charlotte is home to
over one-third of the total inventory
in Mecklenburg County with 17.3
million square feet
• I-77/Southwest is second with 7.9
million square feet, less than half
of Downtown
• Location, location, location…
many companies are seeking
integrated and active locations to
attract top talent
0.3%
1.4%
2.1%
2.2%
4.8%
7.0%
9.0%
10.2%
13.2%
15.6%
34.2%
0.0% 10.0% 20.0% 30.0% 40.0%
Cotswold
Park Road
East
CrownPoint/Matthews
North
Midtown
SouthPark
Northeast
Ballantyne/South
I-77/Southwest
Downtown
% of Market
Submarket
Office Inventory by Submarket, 2016

19. Charlotte’s Office Market
Office Market Performance, Charlotte Region, 2013-2016
14.8% 14.3%
13.2%
9.8%
0%
2%
4%
6%
8%
10%
12%
14%
16%
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
2013 2014 2015 2016
VacancyRate
SquareFeet
Completions Net Absorption Vacancy Rate
Vacancy
3.4%
Rent Growth
3.3%

20. Charlotte’s Office Pipeline
• ~2.2 million square feet
of office space under
development
• Includes speculative and
build-to-suit projects for
specific companies
• Falling vacancy has
spurred development,
with a focus on CBD and
surrounding areas

21. Closing Considerations

22. What are we seeing?
• Growth in the most competitive states, cities, and submarkets is
accelerating, and their market shares are increasing
• Mixed-use urban experience is the clear winner, even in suburban
locations; time is increasingly valuable commodity and digital age creates
demand for “connection” and “experience”
• Most desirable locations accessible by “thick” or “layered” network of
transportation (air, highway, transit, train, bike, pedestrian)
• Younger demographic is driving more employer location decisions in
order for companies to attract the best talent
• Real estate market is responding to preferences of Millennials for housing
and retail, but don’t forget the aging Baby Boomers and their spending
power

23. Is Charlotte Following Suit?
• Growth is not evenly distributed across the region – like the
Country market share is increasing in some areas while declining
in others
• 0
• Many of the densest developments are seeking proximity to
transit; exception – SouthPark
• SouthEnd is a different place from a decade ago
• Development momentum already beginning along northeast corridor
• What about the Streetcar?
• How will SouthPark address traffic congestion moving forward?
• Land uses are integrating, offering more options to ‘live, work, and
play’ all in one place
• The mixed-use model has been especially prevalent in some of the suburban
developments – capitalize on outer-belt mobility
• Think: Waverly, Rea Farms, Crescent Providence Farm, River District

24. Jessica Rossi, AICP
Senior Planner & Economist
Kimley-Horn
jessica.rossi@kimley-horn.com
704.954.7484