Originally published in Urban Land Magazine on April 29, 2019.

With a relatively low cost of living, above-average population growth, a mild climate, and abundant land for development, the Southeast continues to be one of the most popular areas for real estate development in the United States.

The region, including Florida, Georgia, North and South Carolina, Alabama, Mississippi, Virginia, West Virginia, and Kentucky, boasts 21 percent of the total U.S. population and accounts for 28 percent of total housing starts.

“Broadly speaking, the states in the Southeast are in relatively good shape in terms of state finances, with few exceptions,” says Ed Friedman, a director at economic forecaster Moody’s Analytics in West Chester, Pennsylvania. “Some states have made big efforts to boost manufacturing, especially in the auto industry, including Kentucky, Alabama, and South Carolina—and, in South Carolina’s case, aircraft.”

“Tourism is a major economic engine all over Florida and in South Carolina,” he says. “Defense spending is an above-average source of support, with the Southeast having five of the top six states with the largest populations of active-duty military personnel—Virginia, Georgia, North Carolina, South Carolina, and Florida.”

Hurricane Florence, though leaving extensive damage and disruption in the Carolinas, especially North Carolina, is not expected to have a lasting economic impact on the state.

“Although flooded areas along the coast and inland will need time to rebuild, the Carolinas’ largest economies were spared, and the most significant tourist destinations—Myrtle Beach [South Carolina] and the Outer Banks [North Carolina]—came away mostly unscathed,” says Adam Kamins, also a director at Moody’s Analytics. “Rebuilding will be a tall task in places like Wilmington [North Carolina], but those efforts will provide a short-term economic lift, and the region’s positive long-term trajectory is unchanged as the Carolinas’ structural advantages remain intact.”

North Carolina

North Carolina’s economy is heating up—again. Year-over-year employment growth has accelerated, moving above 2 percent and easily outpacing the national average of 1.7 percent growth.

“Growth has been especially strong in tech, logistics, and housing,” says Dante DeAntonio, economist at Moody’s Analytics. “Strong demographic trends and a tightening labor market are increasing the pressure on an already hot housing market as builders struggle to keep up. The influx of workers to the dynamic labor markets in Charlotte and Raleigh is straining the already limited capacity of multifamily housing and driving rents higher.”

Thanks to a resilient economy, 2019 is forecast to be another year of growth.

“While there is a lot of construction across all product types, we are seeing continued strong demand, so we don’t expect any major imbalances to tip the real estate market one way or the other,” says Rob Cochran, managing director in Cushman & Wakefield’s Charlotte office. “Population growth in the major metro areas has remained consistently strong and is expected to continue.”

The Research Triangle—with North Carolina State University, Duke University, and the University of North Carolina at Chapel Hill—is heavily dependent on the education and medical sectors and high tech, while Charlotte is focused on financial services but is becoming much more diverse with strong growth in technology firms, he notes.

In the Charlotte central business district, two major projects are underway, Cochran notes: the first phase of Lincoln Harris and Goldman Sachs’s Legacy Union, which includes a 33-story 853,000-square-foot (79,000 sqm) tower scheduled for completion in 2019, and Crescent Communities’ Ally Charlotte Center, a 26-story, 742,000-square-foot (69,000 sqm) office tower expected to be completed in 2021 and house the Charlotte operations of Ally Financial.

While real estate development continues, infrastructure to accommodate the growing population and business activity remains the biggest issue all major metro areas face, Cochran notes.

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