While there is $7B in the Charlotte construction pipeline in Uptown and South End alone, that may not be enough to meet the booming demand in North Carolina’s biggest city. 

Supply chain disruptions and inflation continue to delay timelines, causing increased construction costs, and permits issued for projects have decreased. 

“While the construction industry has plenty of work in the pipeline, it’s getting increasingly difficult to execute specific projects from a lending standpoint,” said Peet Poillon, senior adviser at NFP, an insurance and benefits coverage firm. “Rising construction costs are also making it harder for deals to pencil despite the demand.”

Poillon attended Bisnow’s Charlotte Construction and Development Outlook event on July 13 at Omni Charlotte Hotel, where NFP Managing Director Evan Taylor moderated a panel titled the Impact of Construction Financing on Development Pipelines. Taylor joined other speakers in discussing strategies for area construction companies to secure more financing. 

Bisnow spoke to Poillon about the state of the Charlotte market, some of the construction and development challenges in the city and what NFP is doing to help local construction companies move forward. 

Bisnow: How would you describe the state of construction and development in Charlotte?

Poillon: It’s still a busy environment with tons of work to be done. The attraction to this area continues to grow, with people and businesses flocking to Charlotte at historical rates. These trends are driving construction and development in the city. There’s also a housing crisis — both in Charlotte and nationwide — which opens up the demand for more multifamily and affordable housing developments.

Our general contractor clients typically have very healthy pipelines, but lending continues to be a concern, particularly for larger projects. Lenders are requiring developers to have more equity upfront and are more specific on the types of projects they want to get involved with.

Bisnow: What inspired you to sign up to attend Bisnow’s Charlotte Construction and Development Outlook event?

Poillon: The CRE and development community in Charlotte is special. Although it’s a competitive scene, most want to collaborate to create a unified vision for Charlotte. At NFP, we want to continue to build relationships with local companies to better understand their pain points and what they are having success with. We want to find the best way to serve our tight-knit community and continue to be a part of its evolution. 

Bisnow: Can you describe your role at NFP and some of the ways you help construction companies with their projects? 

Poillon: I take a consultative role, educating companies on how they should assess their risk. We are here to act as an outsourced risk management team. We help our clients solve problems, transfer risk and protect their balance sheets in the most efficient way possible.

This starts with a risk assessment, a conversation and usually leads to executing different types of insurance products, including a master property policy with all properties in a given portfolio, a builder’s risk policy, or creating owner-controlled insurance programs and contractor-controlled insurance programs. 

Loss control and safety are paramount in being able to transfer risk efficiently. We walk companies through different mechanisms available to keep employees safe and drive down premiums on all lines of coverage.

Bisnow: What are some of the challenges of securing capital for construction projects in Charlotte? 

Poillon: The biggest pain point I’m seeing is the ability to make a deal profitable with the current lending environment and cost of construction. When we were dealing with historically low interest rates, it was less of a fight to secure debt. Now, if you aren’t willing or capable of putting more equity in on the front end, new lender guidelines have made it challenging or the deal doesn’t become as profitable because the debt costs significantly more. 

Bisnow: With supply chain issues still delaying projects, how should construction companies adjust when setting development pipelines?

Poillon: I think it all starts with the contracts between the developers, general contractors, subcontractors and vendors. While we’re not seeing as many supply chain issues as we did a year ago, they’re still there and can slow down the building process. It’s vital that you have contingencies within contracts that reflect how things might change. Underwriting has to account for any changes that may affect the project.

Clear communication on expectations regarding the different variables involved becomes a very important part of the process. Also, it’s important to have strong relationships where both parties are willing to make concessions in the interest of making the endeavor fruitful for everyone. 

Bisnow: How does NFP continue to adapt to the changes in the market and provide construction companies with services to help them better approach risk management? 

Poillon: In a hard property insurance market, there are tougher underwriting guidelines from insurance carriers. Capacity — how much they are willing to insure — is a big issue on specific types of exposures. We focus on strategic relationships with carriers and arming our clients with tools that allow the risk to be viewed more favorably by the carrier. That may mean implementing specific loss-control and safety practices within their company and improving the asset class, construction type or geographical location they have traditionally targeted. 

This article was produced in collaboration between Studio B and NFP. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.

While the national industrial vacancy rate sits at 3.9%, unstable economic conditions continue to worry lenders, investors and developers alike, causing a chain reaction of skepticism to spread throughout the sector. Because of this, demand has somewhat softened. However, it continues to be strong on a relative basis.

One market that is still on the upswing is South Florida.

This year, the South Florida industrial market closed Q1 with a 3.7% vacancy rate, below the national average. The market also has 13.3M SF currently under construction, a significant uptick from last year’s 10.4M SF.

The market is showing signs of growth and resilience, and BBX Logistics Properties, a South Florida-based infill logistics development company, is focusing on finding opportunities where others have not. Backed by BBX Capital Real Estate, BBX Logistics Properties understands the importance of quickly meeting the evolving needs of its clients and the industry at large, said the firm’s president, Mark Levy.

“Given the team’s tenure in industrial real estate, we use a very specific set of analytics to seek out and analyze development opportunities,” Levy said. “While we remain bullish on the Florida market, we are in a period of transition where markets are normalizing and values are resetting. Given the sophistication of data intelligence, more attention will be given to investment fundamentals and sustaining long-term value.” 

Levy will be speaking at Bisnow’s South Florida Industrial and Logistics Summit, along with other local leaders in the South Florida industrial market, including Malcolm Butters, principal at Butters Group, and Erin Byers, executive vice president of industrial at Colliers, on June 15. Register here.

Bisnow spoke with Levy about what inspired him to speak at this event, the challenges the market is facing this year and the new trends that investors and developers should be aware of in South Florida.

Bisnow: What inspired you to speak at Bisnow’s South Florida Industrial and Logistics Summit? What topics will you cover? 

Levy: Bisnow does a great job of reaching a broad audience, so it is an opportunity to talk not only about all the work that BBX Logistics Properties is doing in the market, but to discuss more broadly the market opportunities and challenges that we’re observing. The logistics sector is an important component of the South Florida real estate landscape, and we appreciate the opportunity to add to the overall conversation.

At the event, it is important we focus not only on opportunities, but also how to effectively navigate challenges brought on by the current market uncertainty. We also will touch on how we are underwriting differently today and offer a forecast on rental rate growth, land values and how demand is evolving.

Bisnow: Can you tell us about the business plan you put in place at the launch of the business and what projects the firm has been working on?

Levy: We started the company with no pipeline, and have opted to build our deal flow by taking on challenges where others may not. The entitlement process takes time and has great inherent risk, and we’re fortunate to have an experienced team to lead us through this complex process.

We are in the midst of entitlements on a number of projects in Broward and Palm Beach counties, as well as in the early stages in the Tampa and Orlando markets. We just received final approvals on an approximately 700K SF, three-phase project in Delray Beach, at U.S. 441 and Atlantic Avenue, which we plan to commence later this year. This project symbolizes our thesis of delivering best-in-quality logistics space in severely constrained, high-barrier locations. I’ve been very fortunate to have worked in multiple eastern U.S. markets, and as such, we also have a steady pipeline of interesting opportunities outside of Florida.

The firm is focused on properties that meet our defined criterion, and as I stated previously, we exercise tremendous discipline in our location analytics. It’s not just infill, per se, it’s a confluence of a series of factors that drive our decisions.    

We’re also focused on helping our customers create a better employee experience. The war for talent isn’t easing. This involves focusing on amenities and quality-of-life elements. We also strongly believe in community benefits, and are laser-focused on ensuring we are integrated into the communities in which we build.

Bisnow: What are the long-term goals for BBX Logistics?

Levy: Our goal is to build an enterprise that delivers maximum value to our investment partners, customers and the community.

From a geographic standpoint, Florida presents opportunities few other markets do. We’ll focus on key markets throughout the state and will be opportunistic in other key growth markets such as Charlotte, North Carolina, and Texas. We’d be remiss not to enter the New York and New Jersey markets, as we are also convinced of the permanent drivers that exist there. What we won’t do is speculate on markets or build projects based on the theory of ‘build it and they will come.’ We will leave the market-making to others. 

Bisnow: What challenges are industrial investors and developers facing in South Florida? 

Levy: The basic challenge is land availability. We need to think about how we build projects in the future with respect to verticality and mixed-use orientation. This may also be exacerbated by Florida Senate Bill 102, which will reflect the ability for affordable housing to be constructed by-right on sites with an underlying commercial or industrial zoning.

We are also dealing with a paradigm shift — money has a cost, construction labor shortages are real, and supply chains will take years to correct. Due diligence is ‘en vogue’ again, and scrutiny and more comprehensive deal level analysis is back.   

Bisnow: What trends should investors and developers be aware of in the South Florida industrial market?

Levy: Redevelopment is the major trend across the board in South Florida. We are beginning to see some opportunities to repurpose obsolete office and retail assets. We will also see opportunities in redeveloping older industrial assets. Mixed-use is a growing component of this equation.

We’re also focused on developmental impacts in the communities in which we live and work — both socially and environmentally. In South Florida, we need to become role models for how companies give back to their communities, as well as partnering together to build a better future. Environmental considerations are especially important, including how well a property is positioned to handle climate-related risks like rising ocean levels and extreme weather. We’re conscious about seeking specific building certifications to limit our environmental footprint and operate at the highest standards to increase overall efficiency.

For more information on BBX Logistics Properties, please click here.

This article was produced in collaboration between BBX Logistics Properties and Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.