At Business North Carolina Commercial Real Estate Roundtable, Smith Anderson’s Mike Thornton Says State is Well Positioned for Success
Business North Carolina (BNC) magazine hosted Smith Anderson attorney Mike Thornton and other North Carolina real estate leaders who took a deep dive during a roundtable discussion about how the changing economic landscape is affecting the state’s commercial real estate industry.
Mike joined Andy Andrews, chairman and CEO of Dominion Realty Partners; Greg Hatem, managing partner of Empire Properties; Kimberly Kendall, senior director, Colliers International; Steve Malloy, commercial broker and owner, Adcock Real Estate Services; and Evan Stone, vice president, industrial development, The Carroll Companies at the Greensboro Chamber of Commerce.
"There’s a lot of talk about what the effect of hybrid working is going to be," Mike said. "I don’t think we’ve come to the point yet that employers are leasing smaller spaces, because people are working from home. I haven’t heard of that yet because what are they going to do on the days everybody comes in? It could happen soon. But I think the shrinkage in occupancy is more dictated by companies looking for more efficient space and cost savings."
Major challenges are evident, particularly in office real estate, but the group agrees that North Carolina is well-positioned because of population growth and a positive economic and political climate.
"In a market like Raleigh and North Carolina, we’re in a much luckier place," Mike said. "The economy in other parts of the country has bigger dips; the dips here are smaller because we have a more talented workforce and lower cost of living that continually attracts new business."
Still, Mike cautions that lenders are more cautious, and underwriting is very hard to get for a new office building financed without substantial pre-leasing - at least 40 percent.
"Interest rates aren’t the only issue," Mike said. "A lot of projects I work on get financed by private equity companies … I’m starting to see the private equity companies getting more conservative as well. I think that has as much to do with future development as the interest rate increases."
The group also touched on how brick-and-mortar stores can compete with online retailers.
"The thing about retail is, we’ve moved away from your typical grocery-anchored strip center," Mike said. “In a lot of ways, what you’re seeing now are mixed-use developments that are creating a sense of place with restaurants, coffee shops and entertainment … But you see products coming out of the ground like Fenton in Cary (open air shopping district) and continuing retail development in North Hills in Raleigh. They’re very successful. We see all kinds of parking issues there because so many people are coming."
Mike is a commercial real estate lawyer with extensive experience representing owners and developers of retail, office, multifamily and hotel properties. He co-leads the Real Estate Development practice group at Smith Anderson with a focus on real estate matters, including finance, leasing and joint ventures.