Cal Morgan is optimistic about the 2025 real estate market.
Wilmington is a high-demand area, having above average population and employment growth while maintaining relative affordability, said Morgan, owner of Wilmington-based commercial real estate appraisal firm JC Morgan Co.
Morgan founded JC Morgan Co., 1904 Eastwood Road, about 15 years ago and has since grown his team to six appraisers “who are great at what they do and do a lot of the heavy lifting for the company.”
Its primary market is Eastern North Carolina and stretches down through Myrtle Beach, South Carolina; however, the company also performs specialized assignments through the Eastern United States.
The company focuses on commercial real estate appraisals for a multitude of reasons, including financing, estate planning, eminent domain, property tax appeals and internal planning.
“My father was a commercial real estate appraiser, and I worked for him for several years before moving to Wilmington,” Morgan said. “I moved here in 2004, and then in 2010, I started my business, JC Morgan Co.”
In December, Morgan said he had seen a decrease over the previous 24 months in the number of properties his firm appraised for financing purposes, which is also the bulk of its appraisal work. This decrease is largely due to “increased interest rates and the ongoing discussion of a potential recession that’s been going on for the past few years,” Morgan said.
“Financing appraisals are down; however, we’ve experienced growth in all of those other markets, all those other areas,” he said. “With the election behind us and interest rates now trending downwards slightly, people we talk to and work with – the brokers, the developers, the investors – they generally have the sense that activity should pick up in 2025.”
“With the election behind us and interest rates now trending downwards slightly, people we talk to and work with – the brokers, the developers, the investors – they generally have the sense that activity should pick up in 2025.”
ASSESSING THE OFFICE MARKET
“In Wilmington, market reports indicate our overall (office) vacancy rate is less than 2%, versus a national vacancy rate of about 31%,” Morgan said. “However, given the recent activity, the true office vacancy rate in Wilmington is a little blurry.”
Morgan explains that the uncertainty in the Wilmington office vacancy rate is due in part to government purchases of private office buildings.
That includes the city of Wilmington buying the 12-story former Thermo Fisher Scientific headquarters building and its campus on North Front Street to consolidate the city’s offices, previously spread out in aging buildings throughout downtown Wilmington. The emptied office sites are now on the market to help offset the cost of the $68 million Thermo Fisher campus purchase.
“Wilmington has a high percentage of office condominiums and smaller office buildings,” Morgan said. “These smaller properties help reduce the vacancy rate in the market. Wilmington’s four primary office submarkets are the hospital/Independence area, midtown, downtown and Landfall. Each has a reported vacancy rate of under 2%.”
Wilmington has been able to maintain a low vacancy because of limited office development.
“Nationally, office rents in Wilmington are considered low,” Morgan said. “However, (the local) rents are some of the highest among North Carolina tertiary office markets. Over the past roughly 10 years, Wilmington has had limited speculative office development, which has kept supply in check. This has helped the market maintain a low vacancy rate. … For 2025, we expect more of the same, with rent growth at a moderate pace and absorption to head back toward the 10-year average.”
APARTMENT VACANCY RATES COULD PEAK
Across Wilmington, demand for apartments has been strong for the past 10 years, according to Morgan. But in more recent months, vacancies in multifamily apartments have risen.
“Vacancy is now above our 10-year average,” Morgan said. “While the demand and absorption has been strong, which means people are moving into the area and leasing units, it has not kept up with the supply of the new units being built in our market. But the rise of these vacancies and the rise of interest rates has reduced the number of new apartment buildings being constructed.”
As a result, high vacancy rates will “probably peak in 2025 and begin to decline in 2026,” he said.
“Once that happens, we can expect rent growth to turn positive again,” Morgan said. “Rent growth has been positive for a long time here in Wilmington. Rent’s actually trended down over the past 12 months due to the high vacancy because of the lack of construction that’s been going on. Once the vacancies go down, the rent will then pick up again.
“Even with all the rent growth we’ve experienced over the past five to 10 years, Wilmington is considered a relatively affordable apartment market.”
As of January, the average rent in Wilmington is $1,306 per month, according to Apartments.com. That’s 16% lower than the national average of $1,552, the website states.
Morgan said he expects escalating land prices, high construction costs, lingering inflation and higher interest rates this year.
“A lot of people, including myself, got used to interest rates being 3-3.5%, and it can be a while before we see that again,” Morgan said. “That being said, I remain very positive on the long-term outlook of the commercial real estate industry in Wilmington.”
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