Downtown Charlotte, North Carolina.
Less than two weeks ago, as Bank of America execs were entertaining clients and employees over the roar of their namesake 500 mile NASCAR race at the Lowes Motor Speedway just outside Charlotte, the city's other hometown bank, Wachovia, was coming to terms with its own mortality.
What a difference a few days make. Since an article in TIME one month ago lauded Charlotte's seemingly Teflon economy, a gas shortage closed stations and panicked consumers, and Wachovia went from a possible buyer of Morgan Stanley to being acquired itself by San Francisco-based Wells Fargo. The rush to build new homes has created a housing glut, and several of the construction cranes that had come to symbolize the city's growth now hover over stalled projects.
Meanwhile, even as the city builds a new NASCAR Hall of Fame — part of the 3.2 million square feet of new office space under construction uptown — the locally clustered motorsports industry it celebrates is feeling the pain of shrinking sponsorship dollars in the current economy. With close to 18,000 workers in the Charlotte area, motorsports have become a significant employer in the region. But gas prices (despite the recent declines, at one point last week they were the highest in the country) and home economics are driving down attendance at the tracks . "It's a scary time right now," four-time NASCAR champ Jeff Gordon told the Associated Press. "We see strong teams struggling to get sponsorship."
That includes two-time champion driver Tony Stewart, who picked next season (with unfortunate Wachovia-like timing) to strike out with his own NASCAR team. Stewart is finding slim pickings for sponsorship deals that can run from $15 million to more than $20 million a season. He's had to cover his car with two lead sponsors, when he couldn't find one willing to shell out enough money, and has yet to fully fund his second car piloted by former champion Ryan Newman.
It's not just bankers and racers who are feeling the effects of the trickle down recession. After extensive research, Julie and Joe Dalli moved from central Florida to Charlotte about a year ago with plans to open a pizza restaurant that would appeal to 21st century carpetbaggers as well as the "halfbacks," northerners who are moving halfway back after giving up on Florida. "It was Charlotte. We never considered anywhere else," she says. "There were too many positives."
They opened near a planned mall that would have driven traffic, especially during the lunch hours. Now construction for the mall is on hold — if it opens at all. According to Julie, their highly conservative business plan projections are below forecast. For all the planning, she says "I couldn't predict the economy."
After an extended period when home values in Charlotte were not only stable but rising while those in other cities dropped, prices in Charlotte declined 1.8% for July 2008, the fourth straight month of declines. (July is the last period measured by the S&P/Case-Shiller Home Price Index.) "We're seeing a lot of mixed signals in the marketplace right now," says Garrett Alexander, the Mecklenburg County assessor. "I don't think we've seen all the impact of Wachovia. It's too early to tell what that impact will be."
For the first time in more than two decades of unparalleled growth, the city that seemed impervious has taken a direct hit to its self-esteem. Certainly, losing a bank name that's been part of the North Carolina fabric since 1879 is a blow to Charlotte's psyche. But most see as bank's acquisition by Wells Fargo as the best case scenario for Wachovia. "We're disappointed that Wachovia won't remain independent but I believe the strength and stability of having Wells Fargo as a partner will be better in the long run," says Michael Smith of Charlotte Center City Partners. At a merger rally held on October 15, Wells Fargo CEO John Stumpf wouldn't be pinned down on how many jobs might be lost, but he did say that Charlotte would be the combined banks' eastern headquarters.
Those headquarters, which will be completed next year, will most likely carry the Wells Fargo tag. Local officials say that with current uptown vacancy rates of just 1.1%, according to the real estate services provider CB Richard Ellis — by far the best in the nation — even if the building's 1.3 million square feet went empty, the city would still be comfortably ahead of the national rate of 13.6%. Figures from the local chamber of commerce hold that even without Wachovia's contribution, Charlotte will remain the nation's second largest banking center behind New York; $3.3 trillion in assets alone come from the combined Bank of America and its recent acquisition of Merrill Lynch.
At the same time, the investment-friendly biotech industry is blossoming with the official opening on Monday of the North Carolina Research Center in Kannapolis, just 30 minutes from downtown Charlotte. The public-private partnership is the vision of David Murdock, the billionaire owner of Dole Food Company and Castle & Cooke. Estimates are that eventually the campus will create 5,500 biotech jobs locally and 37,000 related jobs across the region. More than symbolic, the NCRC stands on the grounds of a former textile mill, Pillowtex, which closed in 2003 with a loss of nearly 5,000 jobs.
According to Garrett Alexander, the Mecklenburg County assessor, there are 926 new or expanding businesses in Charlotte through the first three quarters of this year, compared with 898 at the same time in 2007. Retail vacancies are at 5.9%, the lowest rate since 1988. There were 9,552 new jobs created, though that marked a 15% drop from the same period last year.
The value of homes in the area remain strong even if that means simply declining less than other markets. Real estate broker Ed Nornes argues that there is a bright side to the housing lull. "It does weed out a lot of people who did not belong in this business."