Mar 21, 2024 - News

Charlotte's under-construction apartments could usher in lower rent

Apartment construction

Photo: Alexandria Sands/Axios

Rent will fall, at least slightly, as a record number of apartments open in Charlotte.

Why it matters: Charlotte is one of the fastest-growing cities in the country, with the cost of living continuing to rise.

Driving the news: Charlotte is in the midst of one of the greatest apartment expansions in the country. That's mostly thanks to flexible, transit-oriented zoning around the light rail that allows for high-density construction.

  • North Tryon, for instance, has become a row of timber towers with "leasing" banners.
  • Average apartment rent is down to $1,566, compared to $1,601 last year, CoStar's director of market analytics Chuck McShane tells Axios. It's about a 2.1% drop.

By the numbers: Charlotte's apartment stock will increase by 13.2% over the next couple of years as construction finishes on 29,300 units, per CoStar data. Percentage-wise, it's the largest apartment expansion in the U.S., ahead of Austin and Miami.

  • The last time Charlotte saw an across-the-board rent drop like this was after the Great Recession when people had lost their jobs and were consolidating households.

Yes, but: Rents are still about 20% higher than in 2020, McShane adds.

  • "This is more of a correction of rents as that new competition comes online," he says.

What's happening: Demand for apartments spiked in 2021 and early 2022 as the population grew, as single residents sought their own spaces and as home buying slowed because of increasing interest rates.

  • A projected 15,000 apartments are opening in 2024 — an all-time high for deliveries in one year, CoStar data shows.
  • To compare, just 13,400 apartments opened in 2023. Pre-pandemic, between 2016 and 2021, an average of about 14,000 units came online annually.

Zoom in: In South End, about 5,900 units are underway — expanding the inventory by 50%, according to CoStar.

  • Rent, currently averaging about $2,040, is down 3.3%. Plus, 36% of properties are offering concessions, like a month of free rent.
  • LoSo has 2,800 units under construction — a roughly 73% addition to the existing market.

Zoom out: Nationally, regular (non-luxury) rents are rising. Charlotte, and the Triangle, are both bucking the trend.

Change in asking rent by apartment type, Q4 2022 to Q4 2023
Data: CoStar; Note: CoStar rates multi-family buildings on architectural design, structure, amenities, site and certifications; Chart: Alice Feng/Axios
  • Nearly 11,000 new apartment units were expected in Raleigh last year.

My thought bubble: People often complain about the number of apartments going up and overlook the upside of lowering living costs for everyone.

What's next: The apartment boom could slow. Groundbreakings in 2023 were about half of 2022's numbers, McShane tells me.

  • The Charlotte metro area gained 50,458 residents between 2022 and 2023, according to census figures.
  • "There's really going to be a tightening of the pipeline come late 2025," McShane says. "And with that, you'll probably see a return to rent growth."
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