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A commercial real estate and investment boom is taking place in the Southeast, and indications are strong the trend will continue throughout 2022 as more Americans—including big-money investors—eye the Sunbelt states ripe with opportunity, a high-profile panel of experts shared recently at Auburn University’s Harbert College of Business.
Among the concepts highlighted:
Speaking to an auditorium audience of professionals, investors, students and faculty assembled Jan. 13 inside Lowder Hall, the panelists provided candid insight to what worked well during the continuing COVID pandemic year of 2021. And while the past year had its challenges, there was consensus that, as one panelist put it, “when headwinds blow in one place, there are tailwinds somewhere else.”
Panel experts represented a diverse range of real estate and capital investment backgrounds, and each shared success stories and optimism for financial opportunities in 2022.
Brian Boyd, a partner with Scotland Wright Associates, one of the first tenant-representative firms established in Atlanta, says real estate investments aimed at office space continue to evolve with the ever-changing demands of a workforce more selective of its workspace.
“The war for talent is the No. 1 struggle for companies,” Boyd said, prompting them to carefully consider what office style will attract workers, such as a traditional high-rise office complex, a convenient location, or perhaps “a really cool building that might help promote greater creativity.”
Meanwhile, COVID’s impact on the nationwide labor market and investors has influenced a migration from the West, Midwest and Northeast regions into the South, he said. That recent migration makes has created market opportunities.
“The Southeast and the Sunbelt are doing very, very well,” Boyd said. “You’re in the best market; in the country for sure, and maybe even in the world.”
Murray Reavis, a 1990 Auburn graduate, is the chief financial officer for Rooker Company, a privately owned firm in Atlanta that develops and owns real estate throughout the U.S., including experience tearing down a 1970s-built mall in Union City, Ga., and converting the property into an industrial development that includes a movie studio associated with Netflix.
“The main thing we do is try to find developable sites in pro-business areas, and we look for population growth where distribution centers can service those areas,” he said.
Inland ports, and thus investment in land and development around them, could someday become more of a norm to help address many of the supply-chain issues affecting today’s economy, Reavis said when asked about future trends.
He pointed to the highly successful and lucrative inland port in Greenville, S.C., as an example, where goods shipped via Atlantic coastal ports are moved directly for the distribution process. Such inland ports have more land for storage facilities than most coastal sites, more options for air/road/train transportation, more access to a bigger labor pool, and can host the entire customs process, thus preventing some of the congestion that can delay getting goods to the consumer.
The cost to ship a single container has jumped from $1,500 to $12,000-15,000 in just the past few years, Reavis said. He also noted the tremendous economic ripple effect that a port can have on the market area around it.
A primary focus point for his firm, operating throughout the Southeast, is investment into industrial real estate and turnaround projects providing supply and distribution buildings. Companies such as Amazon are realizing a stunning growth in online business since the pandemic began.
“People are spending money,” Reavis said, and regarding the demand for facilities, “there is just an incredible amount of capital, and a limited amount of supply.”
Price Hightower, president of Tower Homes, based in Birmingham, and a 1988 Auburn graduate, said he started his business career “flipping houses, because I didn’t have enough capital to do anything else.”
Today, however, his firm is one of the Top 5 homebuilders in Alabama, and it includes a niche specialty in building subdivisions with homes “built to rent.”
Such projects can be small, medium or large in scale, offering opportunity to a wider spectrum of investors who might have limited capital to begin their business, or investors eyeing larger projects with upscale homes, he said.
“We have residents who are renters by choice, not because they can’t afford a home,” Hightower said. Some of the homes his firm builds are for renters “who earn a million dollars a year.”
It does take capital to get started in a market, he said. However, “I think anyone in this room could do it.”
Furthermore, in just about any location today, Hightower said, “if you don’t rent them, you sell them. And the market is great. That’s a pretty good Plan B, right?”
Another Auburn graduate, Zac Gibbs, serves as vice president for Halstead, a company headquartered in Montgomery that is licensed in 14 states and has a large portfolio of development and construction projects.
He talked about the process of selecting strategic locations and developing projects that have multiple attraction points to them, mentioning projects under way in markets such as Pensacola, Fla., and Huntsville.
His company developed the new residential complex in Auburn known as The Samford Glenn, located at 1900 Samford Trace Court near Auburn High School, with resort-quality attraction that helps limit turnover, he said, adding that “the focus on amenities is super important.”
“Our renters are renters by choice, as well,” Gibbs said. At The Samford Glenn, for example, “We do have some students and grad students. But we have a really large contingency of empty nesters, and they are choosing to live in Auburn, to work a few days a week, and they may have a second home at the beach, or at the lake.”
“So it’s really a lifestyle choice.”
The term “‘multi-family’ has a stigma lately, and there are a lot of buzz words,” he said, but also a lot of investment opportunities, some a result of disruptions in the marketplace the last two years.
“We are super-focused on secondary markets in the Sunbelt region,” Gibbs said.
During the pandemic-influenced year of 2021, “we had a heck of a time finding contractors with laborers who could finish the job” because of COVID, he said, with other panelists nodding in agreement.
Supply-chain disruptions also had an impact. “We had a team of people driving to Lowe’s across the Southeast because we had tenants moving in” and needed construction supplies and appliances. Lumber prices rose dramatically. “In a matter of six months,” Gibbs said, “we saw one $6 million line item increase to $12 million.”
Chip Sykes, managing director of JLL Capital Markets, based in Charleston, S.C., shared insight on the value of willingness and good strategy in sometimes finding the right kind of company partners for a major investment.
He highlighted one of his firm’s projects in another booming Southeastern market, the Research Triangle region of North Carolina.
“The Research Triangle is just on fire,” Sykes said. “The demand there is soaring. People are moving there in droves.”
A group of his college buddies came up with an idea to develop 90 acres in Cary, N.C.
“My friends came to me and said, ‘Chip, can you help us capitalize a 3 million-square-foot mixed-use development?” he recalled. “I said boys, I don’t think I can help you get $2 billion.”
They then decided to look for a “heavy-hitter developer” for a partner, and after securing one, it was “off to the races.”
The result is “an amazing project,” he said, including retail space, office space, and 350 multi-family units when it fully opens.
Sykes credited his friends for realizing “they can actually succeed in a project by partnering with a bigger, better partner to get the deal across the finish line.”
Blake Berg is the managing principal for Wicker Park Capital Management, a real estate investment firm based in Savannah, Ga., and is focused on multi-family, retail, office and mixed-use properties in the South.
Berg said more investors are paying attention to the Mobile area.
“We think what’s going on with the port is pretty interesting,” he said. “We think it’s highly overlooked.”
His company, meanwhile, pays special attention to projects that provide family attraction, he said, pointing for example to a development in Allen, Texas, that includes an entertainment component known as “The Hub.”
That venue, expected to be completed during 2022, includes an outdoor stage, open space, a variety of restaurants and eating space.
“There’s just something for everybody,” Berg said. “It is a place where people can be safe, the parents can grab a draft beer, the kids can run around and there’s an open space.
“For you guys out there developing, that’s your ocean,” he said. “And everything around it becomes your oceanfront property.”
The event was sponsored by CityBuilders, an initiative of Auburn University’s Master of Real Estate Development (MRED) program, which creates shared learning opportunities to benefit students, alumni and real estate professionals in the region. The opportunities include symposiums, panel discussions and webinars.
The MRED program at Auburn is a collaboration between the College of Architecture, Design, and Construction and the Harbert College of Business. Justin Benefield serves as its director, and Greg Winchester as advisory council chair.
The next CityBuilders event is being planned for this spring in Atlanta and will include networking opportunities and a symposium on affordable housing. Details will be announced soon on the CityBuilders website: https://wp.auburn.edu/citybuilders/