When it comes to commercial real estate and building in the Asheville area, we might be on the cusp of a historic time.
Hotels, retail spots, offices, medical buildings, apartments, schools — they’re all going up at one time, and more are in the pipeline. Total development investment coming to the area in the next half-decade is staggering, topping an estimated $1 billion.
And interest is coming in all seven of the Asheville area’s commercial corridors — Tunnel Road, Merrimon Avenue/U.S. 25, Patton Avenue/Smoky Park Highway, Hendersonville Road, Long Shoals Road, Airport Road and Brevard Road, said John Spake, founder of Spake Real Estate.
The Reynolds Mountain development in Woodfin, which is to include retail, office and residential, serves as an example, Spake said. It has been under development for more than a decade, and like most developments, it took a hit after the Great Recession of 2008-09, “going dormant,” as Spake describes it.
“If I’d come to you a year ago and said, ‘Hey, we’re going to put $60 million of development in Reynolds Mountain,’ you would’ve said, ‘Spake, you’ve lost your mind,'” he said. “But you’re going to wake up a year from now, and it’s going to be complete. It’s pretty exciting for the north side of the county.”
His company represents the seller, Wells Fargo bank. Spake said they sold a hotel pad two months ago for a new Holiday Inn Express hotel, a 7-acre tract to a business group that will build a $37 million assisted living facility, and they’re under contract for another tract of land that will accommodate two medical buildings.
“I think Asheville has been known for its slow, steady growth, and yes, we had a retraction during the recession, but it has caught up a lot quicker than we’ve ever seen in the past,” Spake said.
Fellow developer Rusty Pulliam, head of Pulliam Properties, suggests the market’s heat is reaching historic proportions. It brings to mind the building frenzy of the early 20th century and the Roaring ’20s.
“With the economic growth going on right now, it’s like I’ve never seen it in my 30-year career,” said Pulliam, who partnered with Spake on the development of the $24 million City Centre office building project and the sale of a hotel site next to it. “I think Asheville has been primed for this growth for years, and it’s just now occurring. If the national economy stays healthy, Asheville is going to have a robust next 10 years.”
Pulliam’s company has a 7-acre tract under contract for retail development along Long Shoals Road, and one of his brokers, Paul Ellis, recently closed a $12.8 million deal on the South College building on Sweeten Creek Road, which two limited liability corporations bought as an investment. The deal, which will have no effect on the college’s operations, highlights how hot the commercial market is right now.
On the western edge of downtown, Pulliam’s company just closed on a deal to sell the former Buncosmbe County Sheriff’s Office on Haywood Street to a hotel developer, a $4 million transaction. With five hotels underway or scheduled to be built downtown, Pulliam says he expects to see five more announced in the coming year or two.
Ellis, who did the South College deal, said this year he’s already handled $18 million in transactions.
“I think as a whole, obviously the residential market always comes back first, but number two is the commercial market — it follows right behind it,” Ellis said. “With commercial as a whole, we’re seeing a lot more franchise people who are coming here with new businesses and restaurants, and we’re seeing a huge boom with the brewing market.”
County and city permitting offices have seen the deluge firsthand.
For the fiscal year that ended June 30, Asheville issued building and upfit permits with an estimated construction value of $400 million, said Shannon Tuch, Asheville’s development services director. In 2012, it was $188 million.
New Belgium’s $175 million brewery on the west side of the French Broad River leads the pack of major investments. The facility should start brewing beer later this year.
But hotels have also drawn a lot of attention — and dollars.
A $12 million Hyatt Place Hotel is going up where the Three Brothers Restaurant used to be on Haywood Street downtown, and work is underway on the $20 million AC Hotel near the BB&T Building. The $16 million Hilton Garden Inn, next to Pulliam and Spake’s City Centre, just east of the Buncombe County Courthouse, should expand downtown’s reach.
“About two months ago, it was just crazy,” said Bob Haynes, who handles commercial plan review for Buncombe County.
Commercial activity wasn’t hit immediately by the recession and didn’t bottom out until 2011, when the county handled 42 commercial building or upfit permits with a value of $22.5 million. That year, they had no permit applications for apartments.
The value of commercial permits rose to $44 million the next year, dipped to $31 million in 2013 and then exploded in 2014 — 98 permits totaling nearly $135 million in work. So far this year, through May, the county is on pace to top that, with 43 permits for almost $79 million in work.
Richard Whitney, president of Whitney Commercial Real Estate, said their total volume of sales and leases, year-to-date, is up 47 percent from 2014. For the past 12 months, compared to the previous 12 months, it’s up 77 percent.
“I feel like the recession ended in 2009, but we didn’t begin to come out of it until the fourth quarter of 2010,” Whitney said.
Commercial development aside, home sellers are pretty happy with life right now.
“We just had the strongest June in residential sales we’ve had since 2006,” said Don Davies, whose firm, RealSearch, tracks residential real estate trends.
In June 2006, Buncombe County saw single-family home sales of 455 houses, with an average sales price of $283,600. This June, Buncombe saw 417 sales with an average sales price of $287,584.
“So we’re kind of back to balance,” Davies said.
With interest rates remaining low, under 4 percent, and movers and shakers looking for opportunities again, Whitney said the investment market is the strongest segment he sees now.
“The highest demand but the hardest to find is investment property,” Whitney said.
‘All the wheels are turning’
Governments, school systems and hospitals are in on the act, too.
- Asheville City Schools has two building projects underway — a new $23 million Isaac Dickson Elementary School and a new $41 million Asheville Middle School, both scheduled to open for the 2016-17 school year.
- Buncombe County’s new Enka Intermediate School, scheduled for completion July 25, came in at $25 million.
- Buncombe County commissioners in January approved a $48.5 million social services expansion to house food assistance, Medicaid and immunization services at the Coxe Avenue location.
- The city of Asheville will spearhead the spending of about $50 million in public funds over the next six years in the River Arts District, with money going toward greenways, road rerouting and other infrastructure upgrades. About 44 percent of public money is coming from federal and state sources, while another $200 million in private investment is expected to flow into the area. New Belgium’s brewery will be a lynchpin in the area.
- Mission Health plans to build an 11-story, $404 million tower on its Mission campus, with site preparation starting in August and a projected completion date of November 2018. When finished, the building will comprise 635,000 square feet and hold new operating rooms, an emergency services department and other spaces.
Pulliam said all of the development feeds on itself, generating more development. More jobs bring more apartments, which bring shoppers and restaurant diners, and hotels bring tourists to buy pints at microbrews or paintings at artists studios.
South Asheville and southern Buncombe County — home to Hendersonville, Airport and Long Shoals roads — remain the hottest markets geographically. Spake noted that several properties they handle the leasing for are near or at full capacity, including the Walmart center on Hendersonville Road, which is 100 percent occupied, and the Ingles Shopping Center less than a mile away, 94 percent occupied.
The nearby Gerber Village shopping center, home to restaurants and retail and, like Reynolds Mountain, slow to catch on, is going to be 90 percent leased by summer’s end, Spake said.
Fitzhugh Stout, senior managing director of the Charlotte office of Integra Realty, which assesses commercial real estate and closely follows the industry, said Asheville is not alone in the boom. His company has offices across the Carolinas, and he says, “We’re seeing a definite uptick.”
“Everything is improving,” Stout said. “Of course, the hottest market across the country is apartments.”
Pulliam said some 3,000 new units will come online in the region over the next five years.
The city of Asheville had a market study done that found an apartment vacancy rate of 1 percent, indicating a huge demand for apartments. Stout said his company has worked on projects in the Asheville area including a 310-unit development near Biltmore Village and another 168-unit development near Brevard Road.
He likened Asheville to another popular tourist destination, Charleston, South Carolina.
“Charleston is experiencing the same thing — the growth has been explosive in apartments and hotels, and office is starting to come into play, too,” Stout said. “I would imagine that’s going to happen in Asheville as well.”
As he puts it, “It is the Carolinas’ time.”
Buncombe County commercial building and upfit (renovations) permits
Year, total, value
• 2009, 85, $36.5M
• 2010, 69, $41M
• 2011, 42, $22.5M
• 2012 41, $44M
• 2013, 57, $31M
• 2014, 98, $135M
• 2015 (through May), 43, $78.7M
Multifamily dwelling permits (apartments)
Year, buildings, units, cost
• 2009, 17, 284, $13.6M
• 2010, 22, 519, $21.2M
• 2011, 0, 0, 0
• 2012, 1, 4, $250,000
• 2013, 5, 80, $2.6M
• 2014, 18, 351, $18.3M
• 2015 (through May), 7, 86, $252,000
Source: Buncombe County Permits & Inspections
Major projects underway or starting soon
• New Belgium Brewery: $175 million investment in the River Arts District, East Coast operations center. The facility should start brewing beer later this year.
• Hyatt Place Hotel: The $12, seven-story million hotel is well under way on Haywood Street where Three Brothers Restaurant, with exterior work nearing completion. Scheduled to open this year, with 140 rooms.
• AC Hotel: Excavation and foundation work is underway on the $20 million hotel near the BB&T Building downtown. The 132-room Marriott-branded hotel at 10 Broadway, planned for nine stories, is scheduled to open during summer 2016.
• Hilton Garden Inn/City Centre office building: The $16 million, six-story hotel and the four-story, $24 million office building on the east side of downtown are well under construction. The project should open in 2016.
• Mission Health tower: The region’s largest hospital plans to build an 11-story, $404 million tower on its Mission campus. Site preparation starts in August; projected completion date is November 2018. The 635,000-square-foot building will house new operating rooms, an emergency services department and other spaces.
• Asheville City Schools: New $23 million Isaac Dickson Elementary School, and new $41 million Asheville Middle School. Both should open for 2016-17 school year.
• Enka Intermediate School: Buncombe County’s newest school is scheduled for completion July 25. Cost is $25 million
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