Ryan Carver, a licensed architect and entrepreneur with over 25 years of experience in the vibrant city of Charlotte, stands at the forefront of the construction and development industry. Throughout his extensive career, Carver has closely monitored the ebb and flow of trends within the dynamic landscape of the Southeast Mid-Atlantic Region. As we reflect on the transformative changes that unfolded in 2023, Carver shares his seasoned insights to navigate the past trends and anticipate the challenges and opportunities that await in the coming year:
The Southeast Mid-Atlantic Region of the U.S. has seen a whirlwind of changes in the construction and development industry during 2023. As we enter the new year, it is important to look back at trends that have shaped 2023 as well as anticipate the potential challenges and opportunities that lie ahead. From emerging development strategies to economic changes, the landscape of the construction and development industry is constantly evolving, causing developers and residents alike to adapt.
We should start by reflecting on the trends of 2023 and learning from the challenges we faced. However, heading into the early months of 2024, developers should focus on diversification, proactive debt management and creating new trends to create “unique” offerings in their developments. Beyond that, we must solve the issue of expensive money. This could mean engaging with new sources of capital from financial institutions to partnerships with other types of private capital providers. We will all be at the mercy of lending regulators but there are still deals to be made. By taking these actions, developers and investors in the Carolinas can navigate the challenges posed by rising interest rates and economic headwinds, fostering resilience and sustainable growth in the region in 2024.
In the year 2024, the Southeast Mid-Atlantic region is predicted to experience a surge in construction activity. With a rapidly growing population in the area, there has been a pressing need for infrastructure improvements to support the increasing demands. As a result, various infrastructure projects such as road expansions, bridge construction, and public transportation enhancements are currently underway. Urban development projects such as this can transform cities.
The Southeast Mid-Atlantic region is going to witness a pullback in 2024 after it’s 40-year high for completed units in 2023. “Eight of the top 10 markets growing their inventories are in the Sun Belt” with Charlotte leading the pack (ref. CoStar Analytics). Project starts to slow in Q3/Q4 of 2023 and while uncertainty is prevalent, this could be a welcome relief to the industry. While developers are figuring out lending sources, where to find cheaper financing (lower interest rates) and how to navigate the current economic headwinds, there is time to reflect on what we should be doing differently moving forward. A slowdown will allow the construction backlog to soften, leading to reduced construction costs and demand to match supply. I predict that the project starts (design) will resume towards the second half of 2024 to have buildings coming out of the ground in 2025. If we can make deals pencil in this climate, when they are at their most expensive, then there is substantial upside to the deals as construction costs lower, CAP rates increase, interest rates drop, and housing demand resurges in 2025.
Furthermore, the economic outlook for this region is optimistic but results are slow to come to fruition. A diverse economic base, including technology, finance, and healthcare sectors, contributes to stability and resilience. Job growth is robust, which is driven by the expanding technology sector and the region’s strategic location for manufacturing, IT, and distribution. Trade and investment partnerships are flourishing, with the region positioned as a gateway for international business. In conclusion, after the Southeast Mid-Atlantic region catches its breath in the early part of 2024, it will still be marked by strong growth and great returns if developers pursue deals through thoughtful development initiatives in a desirable region with a promising economic outlook.
