Jan 8, 2024 - Real Estate

Hundreds of motel rooms across Charlotte are being turned into housing

Rodeway Inn

Rodeway Inn. Photo: Alexandria Sands/Axios

As society evolves and buildings are no longer needed for their original purpose, investors are renovating these structures — empty office towers, lifeless malls and out-of-commission schools — to meet the rising demand for housing.

  • The latest trend to take off in Charlotte: Motels. Converting motels into housing is a fast and relatively cheap process, making it attractive to the public and private sectors.

Why it matters: The City of Charlotte wants to trim the number of motel rooms in high-crime areas, specifically the dozen at the Sugar Creek and I-85 corridor. At the same time, private investors see converting motels as profitable.

Driving the news: Recently a broker with Sage Investment Group was traveling through Charlotte and spotted Sugar Creek’s cluster of motels, the company’s founding partner Emily Hubbard tells Axios. The broker cold-called to ask if the owners were interested in selling.

Like many motel owners since the pandemic, they were.

  • The Washington-based company expects to turn the Rodeway Inn and Speedway Inn into about 200 to 215 micro-housing units over the next 12 to 18 months.
  • Another company, Vivo Living, recently turned a Residence Inn into an apartment complex near the light rail in the University area. Last year, it purchased 587 hotel rooms across Charlotte, Durham and Raleigh – including the Extended Stay America hotels on Yorkmont Road and East McCullough Drive.

Yes, but: Families and children often seek shelter in these types of 2-star hotels. Redevelopment plans can displace them.

  • Sixty-five families are living at Speedway Inn, the city estimates. But a city spokesperson said staff does not think anyone is staying long-term at Rodeway Inn.
  • The city is contracting with nonprofit Crisis Assistance Ministries to relocate impacted families, the spokesperson tells Axios.

By the numbers: Because of their small size and low-cost renovations, motel rooms-turned-studios should be attainable for average workers.

  • Vivo Living reports their rents are 10% to 20% below comparable properties in the market. Renters typically earn around 80% of the average area median income or higher. On average, Vivo can upfit a property in six months.
  • Sage’s units aren’t much more than 300 square feet, but it builds out a full kitchen in each. The company also turns hotel conference rooms and breakfast areas into game rooms and gyms, plus it fences in a dog park. It expects to spend roughly $40,000 per unit.

In a controversial move, the city purchased the nearby Economy Inn last year for more than $4 million. Some council members suggested the city was awarding a slumlord who welcomed havoc in the community.

  • It’s working with Prosperity Alliance and the True Foundation to turn the site into for-sale townhomes. The property will target buyers earning 80% and below the average median income, according to the city’s request for development proposals.

[Go deeper: 3 city-owned properties in Sugar Creek, North End and West Boulevard will get new life]

What they’re saying: Heal Charlotte founder Greg Jackson, a community activist, worries motel conversions could usher in gentrification. These projects could transfer poverty and homelessness to another corridor, he says.

  • “85 to Sugar Creek is prime, prime real estate. A prime place to put your business, franchise, new apartments,” Jackson says.
  • Sugar Creek is one exit from the maturing University City area and not far from Uptown. But it’s a hotbed for crime. Located right off the interstate, the motels’ cheap rates draw human trafficking and drug dealing.
  • Sage states its hotel-to-housing conversions cut crime in areas by up to 50%, based on its data from law enforcement. “People become a part of that community and want the betterment of the community,” Hubbard says.

The nonprofit sector sees the impact of renovating motels as well. Jackson says in Sugar Creek, hotels are taking advantage of families in the worst financial positions. Heal Charlotte was granted recently $2.25 million from the city to house 100 families experiencing homelessness at Baymont Inn on Equipment Drive.

  • The families will be connected to wraparound services during their stay.
  • Another nonprofit, Roof Above, turned the next-door Quality Inn into permanent supportive housing, now called SECU The Rise on Clanton.

Of note: Heal Charlotte announced plans in 2020 to buy the Economy Inn but later found out it would need to be demolished because of its condition.

The big picture: Companies like Sage Investment Group and Vivo Living found a niche after the hotel industry was beaten down by the pandemic.

  • “In the post-COVID era, more people don’t want roommates,'” Hubbard says. “The demand is just insane.”
  • Properties are filling in six weeks, she adds.
  • The developer of The Spoke at McCullough Station (formerly a Homewood Suites in University City) said in a press release that rental demand has surpassed expectations. Blaze Capital Partners subsequently flipped another Hilton, built in 1985. It’s now called The Spoke at Tyvola Station.

Mohammad Jenatian, president of The Greater Charlotte Hospitality and Tourism Alliance, calls converting outdated motels a “win-win.” It improves the local inventory of hotel rooms and adds needed housing, he says.

  • “The offers that some of these hotel owners are getting far exceed any of their expectations,” he says.
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