6 minute read
Interview: Linda Trevor, Broker
complain there is a dearth of skilled talent for roles such as electricians, engineers and plumbers. A shortage of skilled highway construction workers across the United States has prompted North Carolina to launch an HCTA training program, which provides fully funded full-time on-the-job training. Two of every five workers in the building trades are estimated to be on track to retirement by 2031, posing a conundrum for the industry.
Land availability is also getting scarce. Vacant developable lots in the Triangle fell to 14.7 months’ supply in the fourth quarter of 2020 compared with 16.5 months’ supply in the third quarter. The scarcity of land means builders often offer higher prices or better purchase conditions, inevitably pushing prices up. In Wake County, land inventory is running so low that some rural parcels have sold for $60,000 per acre. To find a way around the problem, smaller developers have been trying to find smaller parcels of land that large developers would not be interested in, meaning they avoid a bidding war with Goliath.
But despite rising costs, construction management firm Cumming found in its first quarter market analysis that Raleigh-Durham is actually the lowest cost construction market across a variety of cities. In the Triangle, the cost to build a museum or performing arts center comes in at about $815 per square foot, compared with up to $1,304 in New York City. An acute-care facility might cost $779 per square foot in Raleigh-Durham but $1,455 per square foot in Honolulu. And the $673 per square foot required for a five-star hotel in the Triangle pales in comparison to the $1,044 per square foot price tag in San Francisco.
Key projects There have been several high value projects completed and under construction in the Raleigh-Durham area in 2020. Often, residential comes as a component of mixed use, as is the case with the city of Raleigh, where the entire Downtown is set for a makeover with the Downtown South District, a 135-acre plot of land spanning the I-40 from South Saunders Street to South Wilmington Street and reaching to Water Works Street to the north. Developers are seeking to add a stadium and entertainment complex, 40-story towers, containing more than 9 million square feet of retail and more than 16,000 residential units, and 12 million square feet of office space in a $2.2 billion investment. The project has already gained rezoning approval from the city.
Several other large-scale residential and mixed-use complexes are already under construction in Raleigh’s Downtown. A 40-story mixed-use 12-story tower is being planned by Highwoods Properties in the Warehouse Linda Trevor
Broker Linda Trevor & Co Compass
How do you help buyers in a seller’s market?
The market is very strong for sellers and very challenging for buyers. While we have been in a seller’s market for a couple of years, this drastic shift occurred quickly and it’s tough to bring buyers up to speed. To prepare the buyers, I do everything I can to meet them in person and educate them so that they can see our sincerity. I show them recent sales histories to give them an idea of how much their offer should be so that they know it’s not just me saying, you’ve got to go $20,000 or $30,000 over the listing price. I show them the stats. I warn them that their offer might not be the first. It could be No. 3 or No. 4 and they should have a back-up plan. I show them the different strategies they can use for a successful offer.
What do you do to prepare sellers?
It still can be overwhelming when the showings happen. No matter how much I tell them that the upcoming week will be busy, they are always surprised. They need to be prepared for the showings. Then they need to be prepared for the offers and be ready to navigate the burden of the many offers that do come in. Do they get emotional? Do they care about any of the stories of the buyers? That process itself is something. Sellers are no different than buyers in that they want to make sure they’ve made the best choice. So, really, we just carefully walk them through the offer process.
Will the price of homes continue to increase?
I don’t see stabilization anytime soon. I would say that the old days of 3 to 5% increases is now definitely closer to 10, maybe more. Each neighborhood is a little bit different and every time there is a sale, typically the house is a little higher than the last one.
What are some of the hot neighborhoods?
Everything has benefited but I would say that Cary, Apex and Holly Springs have been leaders, at least for this part of Wake County. Much of Raleigh is still very popular.
District, while developer RALDT 2 is seeking permission for a 40-story mixed-use development with 500 residential units on South Dawson Street. The Nexus, an eagerly anticipated 40-story mixed use development in the pipeline, is located on 3.3 acres that were purchased in 2017 by The Acquisition Group for $22 million. After securing a rezoning approval from Raleigh City Council, developer Capital Square is planning a 20-story development in Downtown Raleigh featuring 296 units.
Looking ahead Although 2020 was a surprising year for real estate, given the anticipated COVID-19 effects at the outset of the pandemic. Rather than hurt, the pandemic bolstered the sector, with the momentum continuing into 2021, especially in high demand markets like the Triangle. Rock-bottom inventory, high absorption rates and allcash buyers entering bidding wars at tens of thousands over asking are continuing to push prices up. This is good news for sellers but not necessarily for buyers, or for existing community residents being pushed out of neighborhoods. Affordable housing policy also needs to be at the forefront of the real estate discussion.
One spark that could ease the inventory crunch is current homeowners cashing in on inflated values. “Some people have looked at the market and decided to cash in and rent for a year or two,” said Jones, of Coldwell Banker Howard Perry and Walston. “Most of the restrictions related to the pandemic are now lifted and this was the linchpin for people to be so reluctant to sell. Today, most sellers can put their houses on the market and receive 10 offers within a week or so. It will be interesting to see if the perceived hurdles ease and if listing inventory begins to rise again. Hopefully, more people will become acclimated to the prospect of selling.”
On the construction side, activity is often seen as a proxy for economic growth given that residential construction contributes $3.08 to GDP for each $1 invested, supports 21.66 jobs, and generates new personal earnings of $1.08. While the market in the Triangle is in high demand right now, certain factors such as high costs, labor shortages and supply chain disruption are putting the brakes on output. Some developers have voiced concerns that construction firms will be unable to keep pace with the demand in the coming years, especially after the Raleigh-Durham market was ranked No. 1 for overall real estate prospects and for home building prospects by the Urban Land Institute and PwC.
Notwithstanding unpredictable costs and supply chain bottlenecks, the future looks rosy for the residential real estate and construction industry. Huge pent-up demand that shows no sign of slowing is bound to keep the industry busy for the near to midterm.
Infrastructure, Transportation
& Utilities:
The infrastructure and transportation segments in Raleigh-Durham are creaking under the weight of the region’s fast-paced growth. Despite the considerable challenges, the good news is that there is also considerable support from the state and federal governments to make improvements.
