• Mecklenburg County proposing development fee increases in FY 2025 Budget - In partnership with the HBAGC we are initiating meetings with key staff at Mecklenburg County to discuss the potential impact of these proposed fee increases.  Here is the Land Use and Environmental Services Agency (LUESA) presentation that was provided to the Mecklenburg County Board of Commissioners on April 23, 2024.

• Gastonia Looking for Feedback on Micro-Transit Fares - The City of Gastonia will host a public hearing on a fare increase at its regular City Council meeting which begins at 6 p.m. on May 7 and will be held at Gastonia’s City Hall, located at 181 S. South Street, Gastonia.  Additional information may be found here.

• Town of Waxhaw Proposed Land Reservation Text Amendment - The Town Board of Commissioners has introduced Text Amendment 14-2024 purportedly to address reserving future school sites but could have the impact of curbing growth in an already difficult building environment.

• Charlotte Tree Manual Updated - Links now available!  Redline Version, Clean Version

• U.S. Supreme Court Rules that Legislation Does Not Protect Improper Impact Fees - In a unanimous ruling, the court found that local impact fees must pass the rough proportionality test previously established in two landmark cases (Nollan v. California Coastal Commission and Dolan v. City of Tigard, Oregon) whether or not the fees were legislatively adopted or applied individually.  See more details from the National Association of Home Builders.

The NAIOP CRE Sentiment Index for April 2024 is 52, a rebound from the September 2023 reading of 46, indicating that respondents expect conditions for commercial real estate to improve over the next 12 months. 

 

Key Findings:

• Respondents have a positive outlook for every component that comprises the Index except for construction costs, which they expect to be higher next year. This marks a turnaround in sentiment for most CRE fundamentals, which was negative for almost every Index component in September.
   
• Respondents are now much more optimistic about capital market conditions than they were in September. The outlook for the availability of debt, the availability of equity and first-year cap rates improved more than for other measures. This shift is likely due to an expectation that interest rates will fall over the next 12 months. In response to a question that is not used to calculate the Index, developers and building owners indicated they expect interest rates to be lower than they had predicted in September.
   
• Respondents also expect demand for commercial real estate to improve slightly. Their outlook for occupancy rates and effective rents rose, with both measures now suggesting some improvement over the next year. Open-ended comments suggest that most respondents expect favorable demand for industrial, retail and multifamily, whereas office will likely continue to struggle.
    
• Developers and building owners now expect their deal volume to grow slightly over the next year. This is an improvement from September, when they had projected a decline in activity. Their expectation of handling a higher dollar volume of new projects and acquisitions reflects an improving outlook for capital availability.

View Full Report

Last night the Charlotte City Council voted to approve UDO text amendment 2024-043, effectively limiting the ability for builders to provide housing products to moderate income buyers.  We have reported regularly on this topic in recent weeks through other editions of our "2 for Tuesday."  This action has led to even greater uncertainty within the building community and will likely translate into higher housing prices, at least in the short term.  Staff is planning to file another measure that will serve as a substitute for the option that was widely utilized by the industry and effectively eliminated by Council.  This new text amendment will likely be filed on Thursday with a public hearing slated for mid-June and a Council vote on June 24th.  We are currently working with staff to ensure this is a viable tool and that it will assist our members in providing the housing types necessary to meet critical supply demands.

Tonight at 5:30 pm, the Charlotte Mecklenburg Planning Commission will take action on UDO text amendment 2024-043 aimed at curbing the use of Conservation Subdivisions for new development.  This action will be to either recommend approval or denial of the proposed amendment.  The meeting will be held in Room 267 of the Charlotte Mecklenburg Government Center, 600 East 4th Street, Charlotte, NC.  If you cannot attend in person, you can visit the City's YouTube page to follow the action.

Passage of the amendment will effectively eliminate the use of this provision and is one of three interrelated matters currently before the council:

1.  Conservation Subdivision Amendment - will result in less density and is currently scheduled for a May 20th council vote.
2.  Addressing the matter of Duplexes and Triplexes in existing neighborhoods - will result in less density, "Clean-up" Text Amendment 3 adds prescribed conditions to duplexes and triplexes in the N-1 zoning category (see page 15-2), the public hearing scheduled for May 20th.
3.  The creation of a Compact Development category (to replace conservation subdivisions) - could allow higher density developments under certain circumstances, still conceptual.

We are encouraging Members of the Charlotte City Council to take action on these provisions simultaneously so they may better consider the big picture as it relates to housing affordability.  

Originally published on April 29, 2024, by Jay Biggins for NAIOP.

In the wake of the coronavirus pandemic, many downtowns across the country remain disquietingly vacant. Office towers that once hummed with activity are a bit quieter, the hallways emptier. The U.S. has the highest office vacancy rates – 18.4% – since 1992. Some levels of hybrid and remote work are here to stay, and now the commercial real estate landscape faces some tough decisions, offering both challenges, which are clear, and unique opportunities, which are less well-defined but coming into focus.

Where companies used to require space for virtually all their workers, hybrid work models mean fewer people in the office and, thus, less need for so much square footage. Now, all across the nation’s downtown areas, developers and owners are asking what the future of the “office” looks like. How do we utilize the space that’s available?

The biggest obstacles confront Class B and C office buildings, often in less desirable locations, lacking amenities and/or technology. These properties have the emptiest space, and many have no viable future as office space.

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Originally published on April 24, 2024 by Matthew Preston for NAIOP.

With many returning to offices, sustainable commuting options are back in the spotlight. With this in mind, a recent study from CommercialCafe explored which mid-sized U.S. cities (populations between 220,000 and 500,000) are leading the way in offering eco-friendly commutes. By focusing on this specific size range, the analysis provides insights beyond major metropolises and allows for more fair comparisons of green commuting practices.

To order to identify the leaders in green commuting, the study analyzed several key factors including public transportation ridership, walking and cycling rates, carpooling engagement, access to EV charging stations, and the promotion of pedestrian and cycling commuting with green amenities and attractive urban environments.

Read on to discover the top 30 cities and gain insights into the best performing examples of sustainable commuting in action.

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North Carolina is the sixth highest-ranking state in the U.S. for overall contributions of commercial real estate to state GDP with $44.1 billion, $19.1 billion in direct spending, $16.7 billion in personal spending, and 312.1 million jobs supported in 2023 (the most recent data available).

• Industrial (includes manufacturing): North Carolina ranks #4
• Warehouse: North Carolina ranks #7
• Retail: North Carolina ranks #7

The data is from “Economic Impacts of Commercial Real Estate, 2024 U.S. Edition” published annually by the NAIOP Research Foundation.

Nationally, the impact of new commercial real estate development in the U.S. continues to grow.

The combined economic contributions of new commercial building development and the operations of existing commercial buildings in 2023 resulted in direct expenditures of $913.1 billion and the following impacts on the U.S. economy:

Originally published on April 18, 2024, by Anna Liza Montenegro for NAIOP.

Real estate development is an ever evolving and, at times, volatile business. Advanced technology can help to mitigate that volatility and improve processes in the construction and real estate industry. Building information modeling, or BIM, is one of the most powerful tools developers can use to reduce risk and ensure the profitability of their investments. BIM not only allows for better planning and project design, but also facilitates collaboration, communication, efficiency and ongoing asset management.

Building Information Modeling (BIM) in Real Estate

What is BIM?

Building information modeling (BIM) is a type of 3D modeling software that can be used to facilitate collaboration on every aspect of a building project, from design to construction to ongoing maintenance. Unlike traditional 3D computer models, BIM images contain vast amounts of data. Each component of a BIM model contains information about costs, spatial relationships, materials and more. BIM can also simulate design changes and identify potential problems before they become reality. Through the power of cloud-based computing, BIM models can be accessed from virtually anywhere in real time, allowing for better collaboration and information sharing among project stakeholders.

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Originally published on April 4, 2024, by Bob Boyer for NAIOP.

In the ever-changing world of construction, creative solutions are key to moving projects forward. In an industry where tradition can take precedence over innovation, it’s important for general contractors to regularly challenge the norm; doing so can uncover modern insights that reshape the way we build the communities where we live and work.

EMBRACING NEW TECHNOLOGIES

Technology exists at the root of all innovative breakthroughs, especially in the construction world. Although sometimes daunting to adopt, these new tools are positioned to help increase project efficiencies, save time and uncover cost-saving opportunities. Examples of these impactful technologies include Building Information Modeling (BIM), 3D printing, virtual and augmented reality, artificial intelligence and blockchain technology. As a forward-thinking general contractor looking to enhance existing processes and enter a new generation of productivity, leaders should consider implementing these tools into their daily practices to remain relevant and up to speed.

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Originally published on March 25, 2024, by Brian Walker for NAIOP.

NAIOP’s Market Share blog sat down with 2024 NAIOP Chair Brian Walker to ask him about his career path, NAIOP experience, and vision for the association this year.

You are the first NAIOP Developing Leader to be named chair. Tell us about that.

I can recall what it felt like to be a young CPA just starting my career. NAIOP and the Pittsburgh chapter were essential in connecting me with the knowledge, research, education and people I needed to launch my career. Our DLs comprise nearly 28% of our total membership, and they’re the future of our industry and association. I’m thrilled to have the opportunity to meet so many of our rising leaders this year and support their growth.

Your career has been largely in the western Pennsylvania market. How has the market changed?

Pittsburgh has transformed from its roots as “the Steel City” into a vibrant hub for healthcare, education, technology, robotics, and financial services.  Western Pennsylvania has been a strong annuity market for investment.  Our real estate has always been built and priced right, with growth slow and steady. The offset is that the market is not growing rapidly, and we see lateral movement from old buildings to new.

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Originally published on March 13, 2024, by Kathryn Atkins for NAIOP.

Although this year’s I.CON West conference is taking place in California, much of the due diligence session applies to the rest of the country. In all aspects of due diligence, the goal is the same: How do we get the project for our investors through the approval cycle with the least risk, time and expense?  

In a panel session, four experts discussed slightly different aspects of due diligence practices (political; biological and resource; California Environmental Quality Act, if applicable; and site selection). Still, the take-home consensus was how properly executed due diligence can give the developer leverage with the growing number of naysayers in cities, counties and states across the United States.  

How do commercial real estate leaders work through increasingly difficult objections to building and growth? Say it doesn’t cost money to mitigate the challenges to the project and each due diligence – it can still push the timeline and invite more “bounty hunters” (those seeking to derail the project and exact a gatekeeper fee for stepping aside). It’s not worth it to some folks, while others with a higher risk tolerance might be willing to forgo the due diligence. It’s a risk. 

All four standing committees of the Charlotte City Council met yesterday.  Here's a quick outline of what was covered with links to agendas and presentations.

Transportation, Planning, & Development

Planning Director Alyson Craig provided an update to the committee and referenced three text amendments that are currently working their way through the process:  

• Conservation Residential Development Standards - This amendment would limit the future utility of Conservation Subdivisions.  If you are developing and building future subdivisions and hoping to maximize your density to provide an attainable or affordable product, you need to pay attention to this one.  A virtual information session has been scheduled for April 9th at 6:00 pm and you are strongly encouraged to participate.  The public hearing for this amendment is scheduled for April 15th with a vote to follow on May 20th.

• Campus Zoning Districts - This amendment adds uses to several zoning districts and creates a new General Office District.

• Clean Up Text Amendment #3 - This one addresses a number of the issues raised by REBIC members over the last year related to such items as "contiguous tree save area," the use of EX provisions, street maps/NCDOT conflicts, fencing materials, ADU flexibility, transparency requirements, buffers, and N-2 layout standards.

            Agenda - Planning Presentation, Mobility Presentation

Jobs & Economic Development

            Agenda - Hospitality Presentation

Budget, Governance, & Intergovernmental Relations

            Agenda - CLT Water Presentation

Housing, Safety, & Community

            Agenda - Safety Presentation

2024 Developing Leaders Mentorship Program
Booking Now Open

The always popular DL Mentorship Program is back! This program is exclusively for Developing Leader members (ages 35 & under) and provides a special forum for personal and professional growth through one‐on‐one learning sessions with accomplished and experienced professionals in the CRE industry. Take advantage of this opportunity to benefit from the knowledge, guidance, and ideas willingly shared by the program mentors.

The specially designed Mentorship website allows each participating mentee to familiarize themselves with the program mentors and book 1‐hour sessions with them to discuss career topics important to the mentee. Meetings can take place between April through June.

NOTE: 2024 mentors are still being confirmed/added to the website & are in the process of updating their profiles.

Booking is first-come, first-served! The Mentorship Program provides a special forum exclusively for DLs to meet one-on-one with selected industry leaders. We have 20+ mentors for this year’s program, all with extensive CRE industry knowledge. Take advantage of this opportunity to make connections and benefit from their knowledge, guidance, and ideas.

Book Your Session

New UDO Text Amendment

During last night's Charlotte City Council Business meeting, Planning Director Alyson Craig announced the filing of a new text amendment aimed at tightening rules for Conservation Developments.  The amendment will include the following:

• Require an additional 15% tree save (green area) = 40% Total
• Increase minimum project size to 5 acres
• Increase minimum dimensions of open space
• Increase standards for useable open space
• Add additional perimeter buffer requirements
• Require lots to front public streets or open space (not private streets or alleys)

The initial proposal (virtually identical to the one offered last night) was presented at the March 7th meeting of the UDO Advisory Committee where a more comprehensive presentation was provided.  As was earlier reported, this elicited a rather spirited discussion among committee members both through regular conversation as well as virtual chat.

This particular change appears to be on the fast track as the schedule is as follows:

• March 28th UDO Advisory Committee
• April 9th Planning Commission
• April 30th Zoning Committee
• May 20 Council Vote

We have submitted multiple comments on the above proposal and will reiterate those concerns during Thursday's UDO Advisory Committee meeting.   

Duplex/Triplex Issue

Two additional recommendations were also offered during last night's session:

#1 Prioritize New Housing Supply in Key Locations - Create a Compact Development Option for new residential subdivisions 2+ Acres     

Originally published on March 2024 by Hany Guirguis, Ph.D., Manhattan College and Joshua Harris, Ph.D., Fordham University for NAIOP.

With the U.S. economy expected to continue to grow slowly, the authors estimate that quarterly net absorption of industrial space will average 14.0 million square feet per quarter over the next two years, or 62.8 and 49.1 million square feet in 2024 and 2025, respectively. This forecast represents a relative “cooling” trend following what had been a protracted period of above-average industrial absorption following COVID-era demand shifts that accelerated the need for distribution space to meet consumers’ increased preference for home delivery. As such, the projected slowdown in net absorption reflects more of a “return to normal” than a negative outlook for occupiers of industrial real estate.

The Industrial Market

After two years of absorption that significantly exceeded long-term averages, industrial net absorption in 2023 totaled just 93.7 million square feet compared with a record high of 486.6 million square feet of completions. While such a supply and demand imbalance is usually a cause for concern, the effect has been to bring balance back to an industrial market that had been substantially undersupplied since 2020.

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Originally published for the Spring 2024 Issue of NAIOP Development Magazine by Anthony Paletta.

The Judson Mill District honors Greenville, South Carolina’s rich textile manufacturing history as it weaves a new plan for the future.

Greenville, South Carolina, once styled itself the “Textile Capital of the World.” While it might be difficult to quantify that superlative, there’s no question this small city along the Reedy River in the foothills of the Blue Ridge Mountains had ample claim to being one of them.

The city and its surrounding landscape once contained 18 textile mills, only two of which remain operational today. Four of the mills burned down or were demolished, but the rest remain standing, and they have proved to be excellent fabric for reuse. At least nine have been converted to new functions, including residential, office, and mixed-use. The most recent conversion is Judson Mill, an 800,000-square-foot complex that has returned to life as a mixed-use project containing apartments, retail, offices, and more.

A Century of Industrial History

Adaptive reuse is often an undertaking for buildings that have long sat dusty, but this wasn’t the case at Judson Mill, which produced textiles from 1912 until 2015. Renovation of the mill began in 2019 as a project of Belmont Sayre Holdings of Chapel Hill, North Carolina, and Taft Family Ventures of Greenville, North Carolina. The project was designed by the Greenville, South Carolina, studio of McMillan Pazdan Smith Architecture.

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Originally published on February 15, 2024, by Toby Burke for NAIOP.

The transportation sector accounts for 28% of greenhouse gas emissions – the highest percentage of any sector, reports the U.S. Environmental Protection Agency. The result of this has been greater public and private sector demand and interest in a national network of charging stations to support the use of more electric vehicles (EVs), including trucks, also known as transportation electrification.

During NAIOP’s Chapter Leadership and Legislative Retreat this week in Washington, D.C., chapter leaders and staff attended a session that recognized the leading role of state governments in establishing a national network of public EV charging stations following the passage of the bipartisan Infrastructure Investment and Jobs Act of 2021. Anne Blair, vice president of policy at the Electrification Coalition, highlighted this and its impact on the commercial real estate industry following the allocation of $7.5 billion from the federal act to establish this national network. The federal allocation is broken into two parts: $5 billion for states under a national EV infrastructure (NEVI) formula and $2.5 billion in charging and fueling infrastructure (CFI) grants.

After stating the case for transportation electrification as a cleaner alternative to oil-based fuels, Blair provided an overview of federal funding investments in the manufacturing and production of EV materials, such as battery production in the southeastern states. Her presentation also included a review of available grant and tax credit programs for heavy-duty trucks and port operations.

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Originally published on March 13, 2024, by Jennifer Lefurgy, Ph.D., for NAIOP.

Understanding the ever-evolving regulations and reporting requirements around ESG can be challenging. A panel of industry experts spoke to I.CON West attendees on why these regulations are about more than compliance. They can lead to market differentiation, improved communication with tenants, and interest from global investors. 

Moderator Megan Krest, associate director of ESG at Cushman & Wakefield, asked the panelists about their work in California involving reporting and compliance. Ethan Gilbert, director of global ESG at Prologis, discussed AB 802, a California law requiring buildings over 50,000 square feet to submit annual energy consumption data to the state. 

“It’s a challenge because most industrial owners are operating under a triple net lease model, so utilities are under the direct control of our tenants,” he said. “The usage is not something the landlords have insight into, yet the state holds us accountable.” 

Originally published on March 12, 2024, by Kathryn Atkins for NAIOP.

When J.C. Renshaw, head of supply chain consulting North America for Savills, started his career 35 years ago, supply chains had not been invented. Okay, they were there, but it was when the COVID-19 pandemic hit that “supply chain” became a household phrase – especially for people who were late to their local retailer to purchase toilet tissue. For the layperson, and even those in the industry struggling to manage their unwieldy supply chain, the definition is the same: getting the right “stuff” to the right place at the right time. Simply said, not easily done. 

In his discussion, Renshaw set the stage for where we are now, covered some of the current megatrends challenging supply chains, and discussed the many countervailing and interwoven forces at work. The goal is to find and wield the magic wand that will result in even the smallest competitive edge in the marketplace. 

From labor shortages, retention issues, and rising costs to international transit through the Suez and Panama Canals, and huge fluctuations in inventory level requirements, supply chain leaders have their hands full. While port volumes and congestion have normalized, huge ports (Los Angeles and Long Beach, and New York/New Jersey) find themselves competing for business – and port incentives are a novel approach the industry has had to embrace.  

Originally published on March 4, 2024, by Lucian Alixanderescu for NAIOP.

For the last few years, industrial real estate development has been on a tear, thanks to elevated demand for warehouse space. Specifically, increased demand for e-commerce – in conjunction with logistical difficulties – led companies to break ground on massive logistics and distribution centers. Now, with warehouse space vacancies normalizing and speculative projects slowing down, CommercialCafe highlighted the next trend taking hold in industrial space construction: manufacturing facilities, particularly for electric vehicles (EVs) and semiconductors.

In a study analyzing the current state of industrial real estate construction and the current pipeline, CommercialCafe highlighted which markets have the most industrial space underway, as well as the largest projects slated for completion in 2024.

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