Why a Smart Business Strategy Includes the Triangle
- Mar 20, 2019
Raleigh-Durham’s educated labor pool and burgeoning technology sector are a magnet for employers and investors, who are ready to maximize that potential. The metro’s multifamily market is trying to accommodate the robust demand driven by a healthy economy and strong population growth.
Durham-Chapel Hill’s population rose 1.5 percent in 2017, more than double the 0.7 percent U.S. growth rate. This, combined with significant growth in the senior population segment, encourages local developers to build more in an area that provides higher yields compared to primary markets.
Raleigh-based NorthView Partners focuses on multifamily development, construction and investment management within the Triangle region of North Carolina. Currently, the company has more than 1,000 units under construction in the Raleigh-Durham market and roughly 1,700 Class A apartments in its portfolio. NorthView Partners CEO Mark Barker, who has more than 20 years of multifamily real estate experience, discusses his company’s investment strategy and revealed his expectations going forward.
How would you describe the Triangle’s multifamily market at the beginning of 2019?
Barker: The Raleigh-Durham market continues to perform well. This is mostly driven by job growth, as we’ve seen about 35,000 jobs added in the last 12 months, with an unemployment rate of 3.5 percent. We have seen a modest slowing in rent growth, resulting from the amount of supply being delivered in the overall market. Some submarkets have performed better than others as those submarkets have not seen as much supply delivered and/or have experienced strong employment growth.
Which submarkets perform best and why?
Barker: We have properties in Northern Raleigh, Cary, Apex and Fuquay-Varina, N.C., and all have done well. We’ve seen the best performance in the southern most portion of Wake County. We believe this is due to our product being tailored to each submarket, the tremendous residential growth that is occurring and because Interstate 540 provides direct access to Research Triangle Park, the area’s largest employer base.
The Triangle produces highly educated young professionals in fields such as technology, R&D or health care. How much multifamily growth is coming from people working in these fields?
Based on our properties’ most recent leasing activity, the fields of technology, R&D or health care have accounted for 30 percent or more of our leasing volume. We expect this trend to continue. We have also noticed an increase in 65 and older residents in our communities. We’ve received positive feedback from those residents on how different apartment living is today, compared to 30 or 40 years ago.
You have recently expanded your business model to include senior housing. What determined you to make this decision and how is the senior housing market performing in Raleigh-Durham?
Barker: The demographics for Raleigh-Durham are very strong for senior housing. In fact, according to Forbes, during the current decade, Raleigh has the second fastest growing senior population in the nation. The projected growth rate for this segment is 4.6 percent for the Raleigh MSA compared to 2.5 percent for the 68 largest statistical areas similar to the Raleigh MSA.
Based on previous work experience, we knew that senior housing is an operating business, not a real estate business. The development process is similar—site identification, design process, entitlement process etc.—but for a senior housing endeavor to be successful, a strong operator is needed.
In order to partner with another company, we needed to align ourselves with a company that shared our values, work ethic, culture and view on doing things the “right way.” Through local networking, we met Steve Morton and his son Arick, owners of Navion Senior Solutions. Based on several meetings, we developed a friendship and that led to the formation of a strategic partnership to develop senior housing with the objective of creating great places to live with the best service and care anywhere in the world.
Which are your most important multifamily projects underway and how many units do you anticipate to complete by year-end?
Barker: Each of our multifamily projects is being built to the National Green Building standards, making them some of the most energy-efficient communities in the Triangle. Our first senior housing project is under construction and with it being our first, it is important to us to build on our track record of successful projects. We expect to complete about half of our under construction units by year-end and the remaining half within the first quarter of 2020.
How do you expect the Raleigh-Durham multifamily market to perform in the year ahead?
Barker: Most forecasts are for the Raleigh-Durham market to continue to experience excellent job growth, population growth and an increasing and expanding economy. So as long as that happens, we’ll continue to see the robust supply being delivered get absorbed. If the local economy does slow down, we could see some softness in occupancies in certain submarkets.
Image courtesy of NorthView Partners