Even with 25,000 apartment units either planned or under construction, if you poll Charlotte developers, hardly anybody seems worried about an oversupply. Even people who live in those South End apartments are concerned about it, but the people building them are not.
The reason? The money is still flowing. And the money will continue to flow as long as people keep moving here.
Developers believe the worst-case scenario is that rent prices go down and incentives (think move-in specials) go up, which actually isn’t a bad thing.
At a broader level, it’s a bet that people will keep moving to Charlotte at rates that put the city atop boomtown lists.
“The reason you’re seeing so many being built is because people believe the demand is coming,” said Bryan Holladay of the Greater Charlotte Apartment Association.
Some Charlotte in-migration stats
- The city is projecting 400,000 new residents by 2040, or about 44 new people every day
- Charlotte currently has about 2,450 residents per square mile. That would have to increase to 3,285 to accommodate that growth.
- Charlotte is already on a trajectory to grow 70 percent between 2010 and 2030.
That’s one of the main reasons banks keep making loans and investors keep ponying up money to build. So far, signs point to continued strength in the market.
Over the past year, Charlotte absorbed more than 5,500 units with only a small bump in the vacancy rate. The average rent still jumped about 10 percent, hitting $1,000, according to new Real Data numbers.
Yes, at the current rate, apartment construction is greatly outstripping raw rates of population and job growth. But the industry believes there’s a key difference between an oversupply of single family homes and apartments.
When houses get overbuilt, owners can walk away – causing all sorts of ripple effects in the economy. When apartments get overbuilt, the owner doesn’t have that option. They’ll sell the building to another owner who’s willing to come down on the rent price enough to fill it. As long as more people are moving into the city, they’ll get filled before too long.
Now, boundless optimism hasn’t always played out according to plan. There is, again, the expectation that banks will cut off the flow of money before it gets too risky. And I’m far from a blind supporter of apartment complexes. We need to talk about design, about location, about historic preservation. We need to talk about turning places like South End into true neighborhoods with homes available at multiple price points.
But for the foreseeable future, apartments are filling up almost as quickly as they’re getting built.