This month, our Director of Land Development Brock Storrusten caught up with Kyle Burns, Land Acquisition Manager at HHHunt. They talked about single- and multi-family housing trends, supply chain challenges, and regional market differentiators as we head into a new year. Read on for Kyle’s 2021 housing industry insights.
Director of Land Development
Land Acquisition Manager
Brock M. Storrusten: What is your 2021 outlook for the single-family and multi-family housing market in North Carolina?
Kyle T. Burns: We’ve seen an incredible pace in new homes sales this year that will likely roll over into 2021. Inventory levels remain constrained, and developers will be hustling to acquire lots to keep up with demand.
The multi-family sector is being watched very carefully as we navigate this pandemic. Renter demand has stalled somewhat over the last year, but occupancy remains stable, and renewal rates are indicating this segment could be sensitive to further economic impacts from the coronavirus. Land for apartment living developments remain competitive particularly outside of the major metro areas as suburban migration continues into 2021.
BMS: How will construction costs/supply influence development in 2021?
KTB: The upcoming year will be a balancing act between managing home prices and controlling costs while still leaving enough margin for the developers/builders to be successful. There’s hope that construction costs will level out as the supply chain catches up from the initial impact of the pandemic, but a competitive land environment ensures that maintaining supply levels will be a challenge across all products types next year.
With supply already constrained and land prices rising, some of the pressure will be passed to the end user through increased pricing, but the bulk of it will fall on the developers, who will be looking for ways to build more cost-effectively while maintaining the same quality product at a price point that’s attractive to consumers.
BMS: How do you think single-family rental units will impact the market?
KTB: This has certainly been a popular subject this year, and we’ve seen more companies and investors diving into this product. As homebuying preferences continue to evolve, developers are looking for ways to adapt and create product to fill those preference voids. There is a large segment of the population that is migrating out of the urban cores and into the single-family lifestyle, but prefer the flexibility that renting provides them, particularly in areas where they might not have the means to afford new construction.
Currently, about 5% of the new construction inventory is build-to-rent, and I see that market share increasing in the coming years. Investors are approaching this product as an ancillary income stream to apartment living with higher rent growth and lower turnover. It also provides flexibility to navigate a locality’s zoning and density restrictions, where traditional garden style apartment communities might not be complementary to the existing characteristics of the area.
I anticipate we’ll see this product line start to grow, particularly in the affordable segment of the single-family market and continue to pick up market share from the for-sale market.
BMS: How can North Carolina improve on attracting development in the Region?
KTB: North Carolina remains one of the most attractive markets in the nation due its robust education, employment, and quality of life characteristics. Infrastructure is often the largest factor that controls growth in any market. Maintaining a focus on and commitment to improving the existing infrastructure and building new infrastructure to accommodate growth will continue to drive development in the region, much like what we’re seeing in Raleigh with the I-540 expansion and how that is accelerating growth along the outer rim of Raleigh.
BMS: How do the NOVA, Richmond, Raleigh, and Charlotte housing markets differ? What are their similarities?
KTB: Each of these markets has its own unique characteristics, but many of the fundamentals are the same. Consumer preferences are starting to be much more consistent across markets, but the entitlement process is where we see the most discrepancy. Having a local presence and knowledge of a market and municipality is critical to obtaining the entitlements needed to deliver a superior quality community. The nuances of each municipality and their respective entitlement process can vary drastically, and having a team with intimate knowledge of that municipality is absolutely critical to success.
BMS: Do you see any differences in timeframes that you can comment on?
KTB: Timeframes for the most part have stayed consistent with pre-pandemic levels. There are some instances where we have seen delays, mostly driven by the volume of projects going through local government offices. However, most municipalities have adapted very well to the current environment and have kept the process streamlined and projects moving forward.
BMS: What is the number one takeaway from 2020, and how can that be leveraged by the development community?
KTB: I think the development community has responded incredibly well to the unprecedented challenges this year has brought. It’s hard to anticipate how a market will react during a global event like the one we’re experiencing now, but maintaining flexibility in order to quickly adapt and evolve will be key. Product differentiation will be important as we evolve out of the pandemic. Municipalities are looking for ways to stand out; developers will need to consider new product lines to achieve density needed to keep up with the demand.
It’s hard to say exactly how things will unfold in the years to come, but we know that development has been a foundation of our economy this past year and will continue to be that way going forward.
BMS: What is your silver lining personally during this challenging time period?
KTB: For me, the silver lining is the time I’ve been able to spend with family during this culture shift to a work-from-home environment. I miss the energy of the office atmosphere and the in-person collaboration that occurs organically from that environment, but having the flexibility to work from home more often has been a blessing. I’m trying to not take that for granted.
HHHunt is a privately held real estate development company with more than 50 years of experience in apartment development, master planned communities, and homebuilding. Kyle Burns is a Land Acquisition Manager responsible for acquisition efforts in the Mid-Atlantic and U.S. Southeast across all of HHHunt’s product lines.
If you have available land or finished lot/pad opportunities in the Charlotte, Triad, Triangle, or Sandhills Regions, contact Kyle Burns at (804) 762-4820 ext. 286 or to find out how HHHunt can help bring your home, apartment, community, or senior living project to life.
For assistance with zoning and entitlements, civil site development, and environmental due diligence, reach out to Brock Storrusten at (919) 515-5179 or bstorrusten@withersravenel.com to get connected with a Land Development & Planning specialist.