Charlotte is cashing in on construction in the financial sector, but the largest city in North Carolina is singing the residential blues like the rest of the country.
An article in this month’s issue of Electrical Wholesaling explores the city’s unprecedented downtown growth and solid construction climate in the suburbs. Office construction is particularly strong, and with its 2.3 percent office-vacancy rate, Charlotte boasts one of the healthiest office-construction markets in the United States.
“We are undergoing unprecedented growth and expansion,” says Brent Spear, president, Electrical Distributors Inc., Charlotte, a distributor with six branches throughout the city and the surrounding area. He says the growth trends for most distributors and construction-oriented companies are very good right now versus one-to-two years ago.
Charlotte has emerged over the past few decades as one of the largest cities in the Southeast. With more than 2 million residents in the Charlotte-Gastonia-Salisbury metropolitan statistical area (MSA), only the Miami, Atlanta and Tampa Bay MSAs are larger. With more than $2 trillion in banking assets, the city is the second largest financial center in the nation, behind only New York. Two of the nation’s largest banks, Bank of America and Wachovia, are headquartered in Charlotte.
“The big banks have by far been the drivers behind this region’s growth,” says Ken McBrayer, principal of Fox-Rowden-McBrayer Inc., Charlotte. “The bank leadership has been committed to this area and fueled the uptown development. There are more cranes in uptown Charlotte today than at any time in the past 25 years I’ve been here. Both Bank of America and Wachovia have new office space under construction, and Bank of America has a Ritz Carlton attached to their space.”
One of the largest projects downtown is the NASCAR Hall of Fame. This multi- million dollar museum and tower is scheduled to open in 2010. Graybar says it’s currently involved in negotiations on the electrical and data communications packages for the project. Mid-rise to high-rise residential condominium construction is also booming downtown.
One area distributor said that if the subprime crisis had happened two years ago, many of these construction projects would have been put on hold and Charlotte wouldn’t be enjoying all of the current construction activity.
The section of the city known as “uptown” is currently undergoing a $3 billion expansion scheduled for completion in the next five to 10 years, said Graybar Electric Co.’s Charlotte Comm/Data Branch Manager Greg Hochheiser and Charlotte Electrical Branch Manager Glenn McCarter. The Charlotte Knights minor-league baseball team is scheduled to relocate to the uptown neighborhood within the next two to three years, bringing the potential for a new stadium and entertainment complex, they said. Additionally, hospital expansion projects and new power plants are on the drawing boards.
One city in the Charlotte-Gastonia-Salisbury MSA growing rapidly is Kannapolis, located in the I-85 corridor north of Charlotte, on the western side of Cabarrus County and the southern end of Rowan County. One of the biggest projects in Kannapolis is the North Carolina Research Campus, a joint venture between Dole Foods, Duke University and the University of North Carolina.
Charlotte is one of the few, if not the only major metropolitan area where home values have not declined. Starts are off, but are not dead, says McBrayer of Fox-Rowden-McBrayer Inc. The residential market is slowing down, and many of the residential contractors are switching from building single-family homes to apartments, said Graybar’s Charlotte branch managers.
Local distributors and reps said in recent years the Charlotte market has experienced significant consolidation among electrical distributors. Said Sam Johnson, president, Farmer Electrical Sales Inc., Greensboro, N.C., “World Electric (Sonepar) has come into Charlotte recently to challenge the market leaders in commercial (HD Supply, Electrical Distributors Inc. and Graybar). McNaughton-McKay Electric and Bryant Supply (now Hagemeyer) tend to focus on the industrial and OEM markets and lead there.”
Herm Isenstein, president, DISC Corp., Orange, Conn., forecasts that electrical distributors in the Charlotte metropolitan area sold approximately $573 million in electrical products in 2007. Total sales for the metro area were up 7.5 percent from the year before. DISC Corp. expects the Charlotte metro area to decrease 3.7 percent in 2008, with weakness in the distributor-served contractor and industrial markets.
Looking out a year from now, Spear said it’s an uncertain picture. While many big projects are underway right now, he says within a year many of them will be completed. “They are large enough in scale that you don’t have these things here every year,” he says. “Normally, every two or three years you get a big one. We have had five or six big ones in a year,” he said.
While the short-term future of the city’s construction market may be uncertain, Charlotte’s long-term outlook is solid because of its financial base, economic diversity and demographic trends.