The Changing Landscape of Multifamily Developments
Adapting to Evolving Renter Expectations and Increased Owner Risk in a Post-COVID Environment
Nicole Goss, AIA, NCARB // Project Architect ©LS3P 2023Long before COVID, ancient Greek philosopher Heraclitus insightfully noted “the only thing constant is change”. As we find ourselves in the midst of rapid cultural transformations initiated by a pandemic and propelled by constantly advancing technology, this statement seems perhaps even more relevant today. In an effort to understand what this current climate means for the future of commercial residential developments, the Bisnow Multifamily Annual Conference recently hosted a series of panelist conversations featuring prominent representatives from Charlotte firms. These discussions, driven by insightful questions from industry peers and partners, shed light on the direction of commercial residential properties leading up to 2025.
The first of three panels placed significant emphasis on a fundamental factor crucial to all of our professional livelihoods: investments. With market conditions and interest rates remaining unstable, the majority of participating firms revealed that only two or three percent of attempted deals are currently coming to fruition. This phenomenon can largely be attributed to a scarcity of accessible debt and the elevated costs associated with financing, when it is even feasible. Lending institutions are meticulously scrutinizing underwritten deal assumptions as they watch some of their counterparts collapse entirely. Yet the presence of Fannie Mae and Freddie Mac, combined with the promising fundamentals of continued growth in population, wage, and employment still enable Charlotte to hold steady as one of the most desirable multifamily markets in the nation.
What implications does this contrasting dynamic hold for the renter? When the second group of panelists took over, it became evident that tenant expectations have only grown in the face of fierce competition among
rental offerings, further intensifying the pressure on developers. Additionally, despite plans for a postpandemic return to office, people continue to spend more time at home than ever before. Average unit sizes are up from 800 to 1000 square feet, with balconies becoming an increasingly sought after feature. However, three-bedroom units continue to decline as townhomes prove to be the preferred embodiment of larger leased dwellings. Unit mixes within the city are seeing less studios while, conversely, this unit type continues to rise in more suburban areas. Across all submarkets, there has been a consistent request for more one-bedroom units with an accompanying office space.
In the era of Amazon prime where “there’s an app for that”, convenience has also become less of an incentive and more of a tenant expectation. Integrated smart systems are the norm, all the way from the unit entry door hardware to the thermostats and beyond. In a bid to cater to renters who frequently travel, some property owners have even begun forging partnerships with Airbnb. Advanced packaged delivery systems are requiring increasingly more space in the mailroom, while amenities are evolving to include podcast rooms and increased sound-attenuation for optimal work-fromhome environments. But the pursuit of connectivity extends beyond the technological realm, with buildingrelated events expected to be carefully orchestrated gatherings that foster a genuine sense of community. Additionally, pet populations have found unprecedented pandemic-led growth, necessitating the provision of greater amenities focused directly on our furry friends.
Considering the weight of debt and demands, some developers have taken to focusing on lower-cost suburban multifamily deals. Interestingly, however, the line that once delineated the characteristics of
urban and suburban multifamily developments has begun to blur. Yet suburban projects continue to boast faster turnaround times and with slightly less amenity expectations, they remain more financially feasible. As a result, adjacent submarkets like Matthews and Lake Norman are booming, even while areas like South End promise higher rental rates. In Charlotte specifically, the supply and demand for multifamily units remains relatively balanced throughout, perhaps except for the University area. However, the uptown region will be poised for rapid growth on the tailwind of our current lull.
Addressing the outlook of multifamily over the next few years, the third and final panel echoed the thoughts of the first two. Additionally, the upcoming revisions to the Unified Development Ordinance (UDO) may pose initial challenges, highlighting the increasing importance of community engagement before presenting to Planning and Development. With all factors pointing to the pipeline of new projects slowing into 2024 and 2025, we are faced with the likelihood of a year-long gap. Architects will continue to be instrumental in the success of multifamily ventures, navigating the intricate balance between code revisions, rising renter demands, and density requirements essential for financial viability. In an ever-changing world, the commercial multifamily industry in Charlotte is positioned to adapt and thrive in the years ahead.
Meet the Author
Nicole Goss brings extensive experience with multifamily, commercial, institutional, retail and hospitality projects. Nicole is actively engaged in professional and academic outreach. She is a member of YMCA of Greater Charlotte Community Impact & Membership Committee, volunteers with the ACE mentor program, and is a professor at CPCC.