Jack Sandlin, Project Manager & Broker, Clarendon Properties

In an interview with Invest:, Clarendon Properties Project Manager and Broker Jack Sandlin discussed development conditions across the Carolinas, hotel demand in smaller markets, and the partnerships needed to move projects forward. “We keep finding opportunities,” Sandlin said.

What changes have had the greatest impact on commercial development across the Carolinas?

Our primary focus is hotel development within commercial real estate, and the economy’s effect on construction costs has been significant. Construction costs have been difficult to manage when underwriting deals and trying to get projects completed.

We operate in municipalities across North Carolina and South Carolina, and the way each municipality works can make it easier or more difficult to move a project forward. Larger issues, such as sewer infrastructure and DEQ (Department of Environmental Quality) requirements, can create limitations in certain markets. Developers have to navigate those conditions and think ahead about whether a project is feasible at that moment or whether it needs to be placed on the back burner because capacity is not available.

How would you describe the commercial development market today?

We keep finding opportunities. We are based in Wilmington, and North Carolina and South Carolina are probably two of the hottest states in the country. People from within and outside the region want to do business in these markets. We are fortunate to understand them well and travel throughout them constantly.

The biggest challenge for us right now is raising money. Construction costs are high, lending costs are higher than they were, and it is more difficult to find capital partners and make deals pencil. We typically find ways to get projects done, but it has been harder during the past year or two than it was four or five years ago.

We often work on city incentive deals in secondary and tertiary markets. In the Raleigh-Durham area, for example, we are working in communities such as Garner, Holly Springs, and Knightdale. In the Greenville, South Carolina, market, we are active in places such as Woodruff and Fountain Inn and are considering other projects. These cities want their towns to grow, and hotels can be a catalyst for that growth. By working with municipalities as partners, we are able to move many of these deals across the finish line.

What signals show that a secondary or tertiary market can support new development?

In the Greenville area, communities such as Fountain Inn are seeing economic growth and new home permits, and the first Tesla facility in South Carolina opened there. Woodruff recently opened a new BMW facility, while the major BMW operation is in Greer, where we are also considering a project.

As larger markets grow, activity pushes outward into surrounding communities. Those areas may have new industry, new homes, and companies seeking locations that cost less than the center of a metropolitan area. New sports and tourism facilities are also important drivers for us.

We may enter a market that has no hotel or only one. The community may host industrial visitors, conventions, or sporting events but lack enough rooms for people to stay overnight. When the existing hotel fills, guests may have to drive 20 minutes to find another one. We use market studies and other data to support our conclusions. Our goal is to be at the forefront in smaller markets where growth is occurring before sufficient hotel supply has arrived.

What are the hardest issues when moving a project from an idea into construction?

Raising capital is one of the biggest struggles. One advantage is that we have developed strong relationships with Hilton and Marriott, the two hotel brands with which we work exclusively. We are able to work with those brands and with cities because we have built a record of entering smaller towns and collaborating with city managers. Those city managers speak with each other and can connect us with other communities.

It is also important to use the right architects, engineers, general contractors, partners, and management companies. All those pieces must work properly to make the project successful. If one does not, the project becomes much more difficult.

When we are developing a hotel type with which we have less experience, we may partner with a management company that understands its operating costs, pre-opening expenses, and other requirements. We collaborate extensively with developers and other companies, using their expertise to refine budgets and projections and ensure that lenders and investors are satisfied.

Where do you see the strongest opportunities during the next three to five years?

I see significant opportunity in the Greenville-Spartanburg market, where we are beginning to do more projects. Greenville has become a strong market, and we are working with and exploring many smaller towns in that area. We are also doing work on the outskirts of Charleston, and I believe South Carolina is a strong place for development.

The Raleigh area is another major opportunity. We have several hotels there, and they perform well. It is a strong market with many different activities and a large number of people who want to be there. Greenville, Raleigh, and Charleston offer some of the biggest opportunities I see for hotels and potentially for dental, medical, and retail development.

What investments are needed to sustain growth in the Carolinas?

In the Wilmington area and north toward Topsail Beach, we are seeing a major push in healthcare. Novant Health has established a strong presence in the Wilmington market and is expanding north toward Hampstead and Jacksonville and south into Brunswick County. That growth is important.

In the Upstate, some communities are doubling the size of their hospitals and adding large recreational facilities. Many are creating a stronger sense of place while new homes are being built. Growing communities need services that can strengthen their economies. Hotels are one component, but healthcare, recreation, housing, and other services all contribute to sustaining that growth.

How does the company view its longer-term position in North Carolina and South Carolina?

We operate throughout both states and strongly believe in North Carolina and South Carolina. We may expand into other markets, such as Tennessee or Georgia, but we are fortunate to be in a region with so much activity. Raleigh, Charlotte, Charleston, Columbia, and Greenville all have substantial traction, and we see a great deal of opportunity.

As metropolitan areas grow, their outer expansion creates opportunities in smaller markets. Companies are branching into these communities, making investments, and taking a chance on their growth. That brings more people into the area and increases the need for hospitality, bars, and restaurants. From our perspective, a hotel gives people a place to stay and use local facilities while helping strengthen the economies of these smaller markets.