COVER STORY, OCTOBER 2009

A REGIONAL GAME PLAN
MegaRegion is development roadmap for Southeast.
Jon Ross

According to the Center for Quality Growth and Regional Development (CQRD), more than half the nation’s growth during the next 40 years will be concentrated around major cities in eight regional pockets. While the greatest population increase will occur in urban areas — Seattle, Los Angeles, New York, Dallas — census counts for smaller towns will also increase in size. Officials around the country have dubbed these geographic areas MegaRegions, and the impending population boom in each region is already being analyzed, even under the weight of the nation’s current economic problems.

The Piedmont Atlantic MegaRegion, which began to take shape 4 years ago, follows Interstates 20 and 85 through parts of six Southern states. From Birmingham, Alabama, to Raleigh, North Carolina — with rest stops in Atlanta and Charlotte, North Carolina — the highway forms the region’s bloodline. Smaller communities, such as Mobile, Alabama, and Jacksonville, Florida, are also points of economic concentration.

On August 11, Charlotte Mayor Pat McCrory and Shirley Franklin, the mayor of Atlanta, met with other mayors from the region to talk about major issues that may arise in the next decade. These challenges include rampant population growth; the degradation of land, water and air quality; an increasingly taxed infrastructure; and development planning. While problems like Atlanta’s congested traffic are somewhat isolated, these bigger issues are region-wide concerns.

“We’re in a position where we’re almost being encouraged and forced to plan together in a way that we haven’t ever thought about before,” says Catherine Ross of the CQRD. “This MegaRegion gives us another way to organize and another way to think about our economy, to think about how we travel, to think about competitiveness in a healthy environment.” Ross calls this “planning without borders.”

Brokers in major cities around the Southeast have started recognizing growth potential in their own sectors of the MegaRegion. In Birmingham, Andrew Loveman, who focuses on the local retail and office markets for Southpace Properties, sees retail growth following the proposed Interstate 459 corridor in Alabama, which would form a ring around Birmingham.

“That would create some rooftop growth that would then be followed by retail growth,” he says. The I-20 corridor between Birmingham and Atlanta also is fertile retail ground. Daniel Corporation’s Grand River development, which is still in the early stages, is proving to be a tourist draw; the corridor is also home to a NASCAR track.

Seeing Southern states working together to nab new companies that would be beneficial to the entire region is more important than an all-for-one mentality, Loveman says.

“There have been cities and states where they have borders where they try to get manufacturing jobs. Where the jobs are close to one of the state’s borders, the state on the other side of the border is going to get some subcontracting work and things like that,” he says. “I imagine that will happen with the Volkswagen plant in Chattanooga [Tennessee].”

While a rise in population is certain, developers that have been burned by the recession will still be cautious moving forward. Loveman predicts that construction will return first at a conservative level and may increase over time.

“Developers will try to do a little more infill sites, probably more than they did in the past,” he says. “People won’t go as far out on the development until they see the rooftops show up.”

On the multifamily side, Dan Eller, an investment adviser at Southeast Apartment Partners’ Raleigh office, expects slow apartment growth in the Triangle area. Contractors stopped building residences once the development market bottomed out, and that means there aren’t many new properties delivering in the market.

“There was enough of a slowdown that [in the next few years] we’re going to have positive absorption,” he says. “We’re going to get to a point where the demand for multifamily housing is extremely high.”

These new buildings won’t necessarily be the same properties that were built in the past. It’s anticipated that older Americans will move into the region and this, coupled with the aging of current Southerners, will bring about a change in development strategies. “You’re going to see more and more developments that are geared toward 55 and older,” Eller says.

These new projects will, without a doubt, tax the environment. Disagreements like the water discussion raging between officials of three Southern states will only get more common. “Even in the Triangle, we’ve had a pretty severe water shortage over the last several years, and that’s something that more housing units is going to continue to contribute to,” Eller says. “A lot of the towns, especially in this region, have started thinking about what they have and are trying to put together more of a comprehensive plan for growth in their towns.”

Of course, the recession is a major hurdle to planning for the future. Brokers in the region say developers and owners are more focused on rejuvenating a sick industry than looking to the next decade.  Scott Hensley, a principal and industrial specialist at  Piedmont Properties/CORFAC International in Charlotte, says it will take at least 5 years for the local industrial industry to regain rental rates of 24 months ago.

“It’s going to be a long, slow process coming out of this recession; it’s going to take a while for us to get back to where we were,” he says. “Everybody’s attention is on what do I need to do today to make sure I survive the next 12 to 24 to 36 months. It’s hard to look long range when you’re really trying to just scratch and claw and survive today.”

Ironically, the economic downturn has created some positive opportunities in the Charlotte market. Hensley says tenants can now more easily find properties in town instead of moving to the outer suburbs. He predicts that activity will pick up when companies see enough of a recovery to start doing business again.

“At this point, we are still very competitive from an operational standpoint. My concern is as our cost of doing business increases, we might lose that competitive advantage,” he says. “That might be one of the biggest threats we have to our region.”

In the end, Hensley is hard pressed to predict what level of growth the Charlotte market will experience and how the entire Piedmont MegaRegion will affect local activity. There simply aren’t enough deals getting done to know what will happen down the road.

“I’m not sure where we are today to know where we’re going,” he says. “You could survey every broker and appraiser in this market and nobody would be able to tell you because there’s no data.”

This lack of data hasn’t stopped Ross from rallying those who will listen around an idea of the future. She sees dense residential development, followed by new retail options to serve an expanding populace. Massive shopping centers will slowly evolve into smaller, more local stores that focus on the immediate community. Mixed-use developments will also spring up, helping to ameliorate the pain of traffic congestion and allowing residents to live without driving.

“There’s a different footprint for living and consuming, and that’s going to dictate our retail and our residential market,” she says.

Ross’ focus is improving upon existing urban environments, but she’s also concerned about fostering proper growth in the next wave of cities, which is a large part of the Piedmont Atlantic MegaRegion plan for responsible and sustainable growth. 

“You look at the economic core of the Piedmont Atlantic MegaRegion. … Cities are going up between those big cities,” she says. “How are they going to grow? What’s the density going to look like? We focus on the MegaRegion, but it starts from the ground up from very small cities that are important.”

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