Spotlight On: Andrea Howard, Managing Director of Investment Sales, Northmarq

Spotlight On: Andrea Howard, Managing Director of Investment Sales, Northmarq

2022-07-12T03:40:20-04:00May 6th, 2022|Charlotte, Real Estate & Construction, Spotlight On|

Andrea Howard3 min read May 2022Andrea Howard, managing director of Northmarq in the Charlotte region, met with Invest: to discuss the growth of the Carolinas. She stated that the economic prosperity will be long-lasting for the whole community, as the type of expansion it experienced cannot be reversed. 

What have been the major highlights or takeaways from this unprecedented period?

The continued migration to the Sun Belt markets, in particular the Carolinas, was strong, despite a global pandemic. We saw a massive number of people wanting to move here, which is evident in reports from U-Haul noting the mass exodus from California and the Northeast to the Carolinas further fueling unprecedented demand for housing.  Just like people, investment capital fled California and came into Charlotte, increasing demand for multifamily properties and driving pricing to new high watermarks. 

With the war for talent across all industries, the Carolinas benefit from being known as a place where young people can grow in their career. One of our biggest developments over the last 18 months in Charlotte and in the state’s history is the announcement that Centene would move its regional headquarters here, adding 6,000 new jobs to the market. Investment dollars are also coming here because of the business-friendly nature of the state. People feel like we were more moderate in the handling of COVID, and are aware that we are also more conservative in terms of our tax environment.

Now that the pandemic appears to be waning, how do you see the changes that occurred playing out?

The changes we experienced are permanent, with those new residents realizing the incredible quality of life, low cost of living and how affordable this region is. Compared to many other markets, the cost of living, including the average rental rate of an apartment, is still less expensive with most renters paying less than 30% of their income on rent.  That environment results in a better quality of life, enabling people to afford their lifestyle more easily than in California or the Northeast. This puts Charlotte on the main stage for employers and future corporate relocations, which I don’t see changing.  We have reached a critical scale in terms of office construction, with new buildings leasing up at a very healthy pace. You don’t go back from this growth, you just don’t.

How have you seen demand evolve for multifamily investment properties over the past year? 

Throughout 2021 pricing for multifamily assets continued to rise as there was more demand for investment in certain submarkets from buyers than there were sellers. Pricing on marketed deals exceeded expectations by 10-15% as cap rates fell fueled by a low interest rate environment and above average rent growth.  Due to the continued focus on working from home, our urban core properties took a bigger hit and investors assigned a higher risk premium to investing in the urban core. Therefore, most of the demand was focused on buying the suburban growth story. In fact, most suburban Class A properties in Charlotte saw an approximate 40% increase in value over the past 12 months. As well, we’ve seen a shift in the quality of capital coming to Charlotte as more and more “Core funds” are now targeting Charlotte for investment in Class A product. The types of institutional quality buyers putting offers on our assets today have historically invested in “Gateway markets” only.  These cheaper cost of capital institutional players can afford to pay more than the traditionally higher leveraged private buyers that dominated the Carolinas historically. These new institutional players are targeting outsized growth and yield that only the sunbelt markets can provide right now.   

Since mid-March 2022, we’ve seen a major increase in the transaction volume across the Carolinas as owners rush to cash in on this unprecedented appreciation before further interest rate increases erode the values of their properties. The cost of debt has doubled since 45 days ago (more than 150bps) so pricing has actually trended down 3-6% across most multifamily asset classes from the peaks we saw late 2021. Transaction volume in 2021 was up over 80% from 2019’s normalized market pre-COVID and totaled $18 billion in total multifamily trades across the Carolinas. Already as of Q1 2022, we are seeing transaction volume up another 80-100% from 2021’s peaks as sellers rush to cash in on peak prices.  Charlotte’s transaction volume and growth is identical to the trends we are seeing across the sunbelt. 

How is this unprecedented transaction volume affecting your team at Northmarq?

We are fortunate to be busy right now.  With transaction volume up, we are hiring and growing our team.  We see new buyers coming to the Carolinas each week and a continued maturation of the product we are delivering. The projected rent growth in the Carolinas is between 12% to 15% in every submarket for a second year in a row.  Our team’s goal is to be the most relied upon advisor in the multifamily space in the Carolinas so we are doing our best to track sales comps, development, replacement costs and cap rates in this rapidly evolving market.  The momentum in our space right now is something I’ve never seen in my 20-plus year career in Charlotte. It’s exciting for sure and hopefully continues to fuel growth for our Northmarq team. 

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