Our markets of focus in North Carolina are Raleigh and Charlotte as well as their secondary and tertiary markets and submarkets along the path of growth between these two important cities in North Carolina.
Raleigh continues to be one of the nation's fastest-growing metros over the past several years. Although the coronavirus pandemic disrupted Raleigh's local economy, the metro's previously strong labor market and technology-heavy employment base can help the market make a strong comeback after the pandemic is over. With the majority of the workforce now working from home, IT services are in higher demand. Though the large local tech industry does not guarantee Raleigh is completely insulated from a recession, it could leave the metro better positioned to weather or recover from the impacts of the pandemic.
Vacancies have remained stable through the pandemic, currently at 7.3% compared to the historical average of 7%
In the last 12-month period, which includes 7 months of the coronavirus pandemic, rental rates have seen some improvements, with average asking rents up by 1.4% on a year-over-year basis. The coronavirus pandemic took a toll on rental rate growth immediately after the lockdown in March, but the market has made improvements in recent months as the economy began to reopen. Vacancies have remained stable, currently at 7.3% compared to the historical average of 7%,and this includes the new Class A constructions that delivered during the pandemic and are facing longer than typical lease-up periods due to the current environment.
The average price per unit in the past 12-month period has gone up to $177,000 from $170,000 Avg. Price/Unit in 2Q2020. Sales activity came to a halt for several weeks following the onset of the pandemic, and sales volume fell by more than 80% from 1Q2020 to 2Q2020. Although a few deals have closed in Q2 and Q3, deal volume is expected to remain lower than typical in the near term.
Charlotte's apartment market has been performing well through the pandemic. Despite a massive supply wave, due to heavy building levels that made Charlotte one of the fastest-growing apartment markets in the country, and slowed leasing activity caused by the coronavirus pandemic, vacancies remain in line with Charlotte's historical average, at roughly 7.7%.
Rental rates took a significant hit in the initial months of the pandemic but rental rate growth has picked up in recent months as the local economy continues to improve. Market-wide asking rents fell by nearly 2% from peaking in March, to their lowest point in May. As the local economy continues to improve, and many residents have been rehired, rental rates have returned to pre-COVID levels.
Market has now surpassed $160,000 avg. price/unit
Although sales have slowed in the wake of the coronavirus pandemic, deal volume is expected to return. Market pricing has now surpassed $160,000 Avg. Price/Unit, compared to roughly $80,000 Avg. Price/Unit in 2010. Over the past 12 months, 120 multifamily transactions have closed in the Charlotte market.
Charlotte's economic growth has been fueled by strong job and population growth. The metro's population has grown at three times the national rate over the past decade. The local government's efforts to diversify its economy have proven effective. Although the economic slowdown caused by the coronavirus pandemic will likely have an impact on Charlotte's economy, Charlotte should continue to benefit in the longer term from its status as a low-cost regional financial hub.