As Wall Street of the South booms, strains seen on Charlotte
Not everybody in Charlotte, North Carolina, is celebrating an expected influx of workers with the newly announced merger of BB&T and SunTrust Banks. Ray McKinnon, a local pastor, is bracing for the city’s housing shortage to get worse.
Charlotte, the banking capital of the U.S. South, is a victim of its own success, said McKinnon, who is a commissioner with the Charlotte Housing Authority. House prices in the area, already home to Bank of America and Wells Fargo’s East Coast hub, have jumped almost 50% since 2012 and rents downtown have soared as millennials flood in for the mild climate and plentiful job opportunities.
“Charlotte has never met a merger it didn’t like,” McKinnon said. “But I don’t think city officials should celebrate until they figure out how to protect the most vulnerable.”
The combined company, which still doesn’t have a name, will put its new headquarters in Charlotte, presumably drawing workers to the area from SunTrust’s home of Atlanta and BB&T’s offices in Winston-Salem, North Carolina, and elsewhere. While both banks will retain operations in their hometowns, Charlotte is likely to get a boost to its already strong economy and real estate market.
However, it could come at a cost, driving up expenses for locals and making the area more vulnerable to the next banking-sector downturn.
“In economics, there are always pluses and minuses — on net, Charlotte will view this as a net plus,” said Michael Walden, an economics professor at North Carolina State University. “These headquarters jobs will, on average, have very good pay, which will contribute to the upper end of the housing market.”
While housing prices are rising in Charlotte, it remains relatively affordable compared with larger financial centers. The average monthly apartment rent is $1,101, significantly lower than New York’s $3,571 and about a third of the price in San Francisco, according to analytics firm RealPage.
The cost of offices in Charlotte is also relatively attractive compared with other U.S. cities. Average asking rents have increased steadily for the past 25 quarters to $27.41 a square foot, a record high, according to commercial-property brokerage CBRE Group. But that still pales in comparison to Manhattan, which charges more than $70 a square foot on average.
While Charlotte is gaining more banking employees, the job market is expanding into new industries. Honeywell International said in November that it was moving its global headquarters to Charlotte. Finance, real estate and insurance now make up 10.4% of the total economy, according to CBRE.
“Charlotte used to be known as a banking city, and our city is now very diverse,” said Chase Monroe, Carolinas market director at brokerage Jones Lang LaSalle. “When we had the recession in the 2008-2009 time frame, it allowed Charlotte to diversify its business.”
The city’s technology labor pool soared almost 60% from 2012 to 2017, the fastest pace among 50 top U.S. and Canadian markets analyzed by CBRE. And with more skilled workers comes higher salaries that can help boost the economy.
Mark Vitner, senior economist at Wells Fargo in Charlotte, said having more affluent homebuyers will help the high-end market, which has softened in recent months, as it has in cities across the country.
“Growth is rarely a bad thing,” Vitner said. “It will give a huge boost to Charlotte’s psyche.”
Jack Micenko, an analyst with Susquehanna International Group, said it’s too early to tell if the bank merger will change the real estate market much.
“It can’t hurt,” Micenko said. “The question is how many jobs are coming and how quickly the jobs arrive. But the Charlotte housing market should be better going forward than it would have been without the announcement.”