On Nov. 1, 2022, ULI Charlotte hosted the Trends in Real Estate event at the JW Marriott Charlotte. The program, which highlighted the 2023 Emerging Trends in Real Estate report, focused on trends that will shape the real estate market over the next five years and addressed the diverging outlook among different sectors and geographic areas.

Keynote speaker Andy Warren, Director of Real Estate Research for PricewaterhouseCoopers, opened the meeting. Warren has co-authored ULI’s Emerging Trends in Real Estate for the past five years and provided an overview of the 2023 report.

Some highlights from the report include:

• Despite coming out of the pandemic, we are in a new age of uncertainty with inflation, rising interest rates, a war in Europe, and an energy shortage.
• Those who consider the real estate market to be “good to excellent” in 2023 are 44% compared to 86% last year.
• People have returned to in-store shopping, but online has held on to its gains during the pandemic. Well-located retail is resilient and is excelling.
• Employees enjoy the flexibility of remote work but also like collaboration and many are choosing a hybrid return to the office. Best-in-class office locations with walkability will do well.
• Business travel isn’t at pre-pandemic levels but has come back significantly, as face-to-face interaction has been rediscovered, but virtual meetings are also convenient.
• Sunbelt markets are popular among investors and migration increased during the pandemic. Charlotte ranks #10 in Overall Real Estate Prospects and is maturing into a market like Dallas and Atlanta. Home prices are outpacing local incomes and our infrastructure is inadequate to handle the growth.
• Housing affordability for single-family homes declined by 37% and average rents rose by 15%.
• The Bipartisan Infrastructure Law and Inflation Reduction Act address traditional infrastructure but also inequities such as digital and environmental remediation.
• Climate change is on track to have a huge jump in billions of dollars of impact from climate-related disasters this decade and will continue to impact and limit where growth can occur.
• Difficulty in finding capital will increase in 2023- this outlook has its biggest gain in 10 years.
• He outlined several opportunities:
  • Need to embrace reuse, especially to create affordable/subsidized housing such as office-to-housing adaptive reuse
  • Last Mile Distribution
  • Meeting Net Zero Carbon Goals
• Overall, the major themes for 2023 are that it will be a little bumpy and there will be a flight to quality of assets.

Following Warren’s presentation, Childress Klein Partner Chris Thomas moderated a discussion among panelists about how these national trends are affecting the Charlotte market

Panelists included:

• Paxton Hollar, Senior Vice President at SunCap Property Group
• Megan Ledbetter, BTR Regional Vice President at Taylor Morrison
• Brian Purcell, Partner at Asana Partners

Here are some key takeaways from the panelists:

• There continues to be high demand for real estate in the Southeast, fueled by population growth. Tenant demand is keeping owners happy but there is a bigger concern in capital and labor markets.
• Retail and office in infill areas continue to perform well but is highly differentiated depending on location. Purcell noted that urban office locations offering highly amenitized space with great walkability are a highly differentiated asset class than 1980s office park buildings. This is similar for multifamily and industrial.
• Capital markets are frozen as they “wait and see” what happens.
• Charlotte is in competition with other fast-growing cities and needs to continue to be pro-business to attract companies and talent.
• Migration still outpaces the increase in housing supply so Charlotte will be a more balanced market than some of those markets in the West.
• Finding ways to work with the government, incentivizing, and accelerating the entitlement process will improve development.
• Developers are optimistic about Charlotte’s Unified Development Ordinance.
• Economic development in Charlotte and North Carolina overall is strong, but major concerns for employers are housing and commutes.
• Companies are luring employees back with amenity-rich office space in cool neighborhoods.
• Most companies are providing opportunities for hybrid work but recognize that collaboration is best done in person at the office.
• Industrial space is evolving to have a lot more office space into the flex because employers are recognizing the importance of having C suite/executives close to the product they are manufacturing. It is leading to higher-amenitized industrial parks with employee perks (e.g. Paxton noted a project in Spartanburg has walking trails, soccer fields, and veggie gardens)
• ESG (environmental, social, governance) is a growing focus among real estate developers, but there is still a lot of work to be done. Purcell said they are focused mainly on the social aspect and are highly focused on Project Destined, whereas Ledbetter noted Taylor Morrison has preserved 5,000 acres of greenspace in the last 5 years across their 19 divisions and is focused on hiring/training veterans in their trades.

There continues to be a lot of national attention on the Charlotte market. Although we’ve slipped to the #10 spot, Charlotte is still one of the most sought-after markets. We must ensure that the city grows wisely in terms of infrastructure and housing to remain competitive for future development.

Thank you to all of the speakers who participated in this event.

Summary notes were provided by Angela Vogel Daley, VP of Strategy and Operations, and Julianne McCollum, Principal for Yellow Duck Marketing.