CHARLOTTE, N.C. -- Apartments are sprouting at a rapid clip along Charlotte’s Lynx Blue Line in South End, as developers look to cash in on a booming rental market and cater to young professionals who want to live near uptown.
While commercial development across the region is seeing slow growth at best, the South End neighborhood has seen a spurt of new activity this year with more than $200 million worth of new construction being announced. Apartments near the Lynx line are powering the growth.
In fact, of the more than 4,000 new apartment units announced in Charlotte this year, 60 percent are within a 15-minute walk of the light-rail line, according to CoStar, a real estate analytics firm.
Two more South End complexes were announced this week, as Camden Property Trust said it would build 324 units at West Boulevard and Camden Road, and 266 units at South Boulevard and Iverson Way.
Driving the apartment boom are demographics: a growing number of young professionals who are either uninterested in owning a home or unable to because they can’t get a mortgage. Rents have been rising, and have room to rise further, said CoStar senior real estate economist Erica Champion.
“In Charlotte, you have this constant inflow of young professionals that will probably rent before they buy,” Champion said.
“(Developers) can get a huge premium being next to mass transit.”
Apartments near mass transit in Charlotte rent for an average $982 a month, compared with an overall city average of $638 a month, CoStar research shows.
Nationally, 65 percent of apartments built in metropolitan cities are within walking distance of mass transit.
“A renter is looking for convenience and lifestyle, and part of that equation is light rail,” said developer Stuart Proffitt, whose firm, Proffitt Dixon Partners, is building Fountains at South End, a 208-unit complex at the New Bern station.
The land’s former owner had planned to build a larger complex with more structured parking, partner Wyatt Dixon said.
The firm bought the land at a discount from the lender, cut the number of units and added a lounge where tenants can wait for the train.
“We bought the property at an attractive price; we had a great design for the site, and we weren’t forced to pay so much for land where we had to over-densify,” Dixon said.
The developers said competition from other complexes makes business more challenging in the beginning. Long term, they said, it helps to establish the neighborhood.
Change of plans
The road to development along the light-rail line hasn’t been smooth. Hopes ran high in the 2000s as the city of Charlotte and area officials worked to build the line. Speculators bought up land, sending values skyrocketing. But activity fell just as quickly when the financial crisis hit a few years later.
More than four years after the real estate market crashed, developers have adapted. Gone are plans for luxury condominiums and other projects. New owners have moved in, with plans retooled to meet today’s demand.
Lenders are more likely to finance a new multifamily complex than other types of commercial projects, analysts say.
Veteran real estate appraiser Fitzhugh Stout remembers speculators snapping up raw land in the 2000s as the southbound light-rail line came closer to reality.
At one point, land values in the south corridor doubled in a two-year period, said Stout, who was hired years ago by the city of Charlotte to study property values near the light-rail line.
Stout was among those bidding on property. He said he and others paid $20 a square foot for their office building on West Tremont Street. The value later rose to $40 a square foot.
“What drove that value was the transit-oriented development zoning,” said Stout, managing director of Integra Realty Resources. “It’s all a function of density.”
Higher density lets developers pack more people and uses into a project without having to provide as much parking as in the suburbs, yielding bigger profits.
Plans for the corridor then included mixed-use projects and luxury condominiums, including one where transparent floor-to-ceiling glass walls would fold out of sight to transform an entire condo into a balcony.
But when the real estate markets slowed in 2008, those dreams fizzled. Property values along the light-rail line fell an average of 51 percent, Stout’s research shows.
Values on the rebound
Stout said South End property values are starting to rise, thanks to the apartment complexes. He said some parcels are fetching around $35 a square foot.
“It’s not quite as high as it was, but it’s rebounding,” he said. “When you can build density, you can afford to pay more for the land.”
Apartment complexes, and their renters, in turn draw more development, such as retail and services, experts say.
While apartments account for the most significant new development in South End, about 40 new retail or service-oriented businesses have opened in the area during the past five months, said Ted Boyd, director of Charlotte Center City Partners’ Historic South End.
“Great urban places are built in layers,” said Boyd’s Center City Partners’ colleague Michael Smith. “The South End began very industrial, and there was a lot of re-adaptive use to create a creative district. We’re in the middle of an incredible transformation from a business district to becoming a mix of uses. Housing is going to become an incredible part of it.”