The commercial real estate market is dynamic, particularly in regard to local economies, politics, submarkets, and asset types. Our clients range from Fortune 500 homebuilders to small local businesses, so we receive a wide range of questions. Providing quality guidance requires sifting through extensive national, regional, and local data sources. Reflecting on the previous year, here are the most interesting and challenging queries:

1. Why have commercial lease rates increased so drastically in the Wilmington area?  
Land prices and construction costs have tripled since 2019. Insurance carriers have left Wilmington to reduce hurricane exposure, resulting in higher costs. Additionally, there is a shortage of quality commercial buildings—simple supply and demand.

2. Why does Wilmington perform better than national totals in retail/office?
With the exception of Bradley Creek Station, very few large office and retail buildings have been constructed in the last 10 years, particularly compared to the local growth rate.  

National Source: Oleh Sorokin, Data Analyst, NAR Washington, DC  
Wilmington Source: Costar

3. What local real estate segment offers the most opportunity?
The demand for industrial space has skyrocketed in response to population growth and residential construction rates. Local regulations make it more difficult to preserve and establish industrial districts.

4. Will the apartment boom ever end?
With housing affordability an ongoing issue, demand will remain strong. However, a lack of available sites and pushback from local municipalities will slow the progression in Wilmington. Other development challenges include higher interest rates, construction costs, and tighter underwriting standards. Regionally, demand is expected to continue; a 2022 study by Bowen National Research indicated a 10-year housing need of 12,147 units.

5. With construction everywhere, how can we have a housing shortage?
While home sales (and prices) skyrocketed during COVID, front-end lot deliveries did not. Costs to deliver finished lots/pads increased substantially, causing builders to question the cost-effectiveness of new projects. Materials prices have moderated; costs have not.  

Brunswick County Planning has approved 48,266 lots since 2015, with another 6,383 proposed. New Hanover County Planning and Land Use indicated that preliminary or final approval for 8,759 homesites has been granted since 2021. Of this amount, roughly 73% have not been delivered or developed.

6. Can local governments keep up with the growth?
Sewer infrastructure and wastewater treatment capacity drive growth and development. A misconception is that sewer expansion is the sole responsibility of local governments. Developers in Brunswick and New Hanover counties spent nearly $300 million on infrastructure during the previous decade.  

Most local governments keep pace with the challenges. CFPUA plans to spend $713.19 million on water/sewer improvements between 2025 and 2034. Notably, many areas of Pender County are without sewer services. Surf City is currently out of sewer capacity, driving development to South Onslow and Sneads Ferry.

7. How do I recognize inflation in valuing income property?
Inflation decreases the future value of money, so it’s vital to budget for expense increases and structure future rent increases accordingly.

Kevin Henry
Senior Vice President Land Brokerage, Development, Industrial, & Investment Sales

Kevin Henry joined CCIP in 2017 after returning to Wilmington from the US Virgin Islands. He focuses largely on private client services, including land development, portfolio management, and investment transactions. His career began in the finance industry in Atlanta, analyzing investment-grade assets. Kevin's extensive experience in underwriting transactions gives him broad industry knowledge and the ability to quickly assess market conditions.