A simple rail line transformed Charlotte’s real estate landscape. The LYNX light rail service, which commenced service in 2007, sparked nearly $2 billion in new construction in Charlotte’s South End and uptown neighborhoods.
The success of the rail, and real estate development around its stations, encouraged the city to continue its public transit push. It recently announced a 9.3-mile, $1.1 billion dollar Blue Line extension project connecting Ninth Street and University City. While the Blue Line expansion is destined to encourage some real estate development in the region, the new infrastructure will not have the same regional impact as the original LYNX light rail.
The Blue Line extension is slated to open in 2017, but the first wave of real estate development has already begun. Developers and investors interested in the Charlotte market should consider several factors when selecting commercial development areas along the new extension: proximity to stations, location along the corridor, and rezoning of land to transit-oriented development (TOD).
1. Keep station proximity in mind. Station proximity will be a key market driver for real estate prices around the Blue Line extension, with multifamily, office, and retail space all seeing an increase in development around certain rail stops. We predict significant development around the first few stops on the extension, including the Ninth Street, Parkwood, 25th Street, and 36th Street stations, due to the revitalization of the North Davidson (NoDa) corridor. Other areas might not be as lucky. The Blue Line transitions from a free-standing rail line to a trolley line positioned in the median of the highway at Old Concord Road. This shift will limit new development and negatively impact the value of real estate around this section of Blue Line extension stops due to the rail’s inconvenient positioning for pedestrians and riders.
2. Choose the right locations along the corridor. Areas around the LYNX experienced development highs and lows based on location — uptown saw 2 million square feet of residential development and another 4 million square feet of commercial development from 2005 to 2009, while other areas in the region remained stagnant. The same will happen for the Blue Line extension. Fruitful land exists outside of the Interstate 277 loop and runs through Sugar Creek station.
Developers can acquire inexpensive land in the region that could yield a high return on investment. Properties along West Craighead Road could also prove to be valuable, with the former NorthPark Mall site ripe for redevelopment, standing as one of the only major commercial properties near the Old Concord Road station.Other areas in the region will struggle to attract new development. Due to a high concentration of existing retail and multifamily projects, the corridor from University City Boulevard station to University of North Carolina (UNC) Charlotte Main station will not see much real estate growth. The office sector near UNC will continue to lag, as high office vacancy rates plague the region.
3. Seek TOD areas. The concept of TOD puts businesses, homes, and workplaces within a short distance of a transit station. Since the origination of the LYNX rail system, TODs have been popping up across Charlotte, with the Fountains Southend at the New Bern station — a complex that combines apartments and a rail stop — becoming one of the most successful in the city. The NoDa area, which lies just southeast of the 36th Street station, is also a strong example of an up-and-coming TOD area, sharing characteristics with Charlotte’s South End right before the original LYNX light rail was constructed. NoDa, like the South End, used to be an industrial center but now continues to see apartment recovery as more residents are driven to this trendy neighborhood. The influx has significantly increased land prices, with a single acre going for more than $1 million. Land prices will continue to increase once the Blue Line extension is completed and more commuters choose to make the NoDa region their home.
The ultimate challenge for developers
While some areas along the Blue Line extension show promise for significant commercial real estate success, investors looking to get in on the ground floor should take a hard look at Charlotte as a whole. Though current demand for new apartments is high, with more than 3,000 units completed each year, the larger question is: What will demand look like in two or three years? Vacancy rates in the South End are low, at 4.5%, and the neighborhood is expected to see $200 million of new construction in the next year alone. With the potential for overbuilding and Charlotte’s ascent to the top of the real estate cycle, developers and investors should proceed with caution.
The Blue Line extension will change Charlotte’s CRE landscape. While some areas will see little growth in the sector, other neighborhoods are on the verge of expansion. The line will help spread development beyond Charlotte’s hot South End region, and trigger growth throughout the city. For more information on the proposed new line, check out the plans and proposed stations in the video below.