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HB2 Brings Corporate Relocations in North Carolina to ‘Screeching Halt’

CHARLOTTE, N.C. — House Bill 2 (HB2), the recently passed North Carolina bill that requires transgender individuals to use public bathrooms corresponding to the sex on their birth certificate, has rocked the state since its passing on March 23. Tech giant PayPal has scrapped its previously announced plans to bring 400 jobs to Charlotte; artists such as Bruce Springsteen, Pearl Jam, Maroon 5 and Nick Jonas canceled planned concerts in North Carolina; and the NBA is considering moving its 2017 All Star Weekend away from Charlotte.

In addition to these headlines, corporate relocation inquiries to North Carolina have essentially “gone away,” according to Chris Schaaf, executive vice president of JLL.

“If you look at JLL’s core business and offerings, one of those services relates to major relocations. The easiest thing for me to do would be to sit up here and say how busy we are for that aspect of our business, but the reality is that it’s come absolutely to a screeching halt,” says Schaaf, speaking at the seventh-annual InterFace Carolinas conference held on June 1 at the Hilton Charlotte Center City. The conference drew 249 brokers, developers, contractors, financial intermediaries, owners and managers who do business in North and South Carolina.

Schaaf was one of four panelists on the “State of the Market for North and South Carolina” panel. The group opened the discussion with HB2, since all panelists agreed that its impact on commercial real estate in North Carolina has been severe.

“When you’re talking about jobs with a California-based company or a Texas-based company and they want to add 200 or 1,200 jobs in North Carolina, those inquiries are no longer coming,” adds Schaaf. “It’s much less about PayPal or Maroon 5 not coming here or Cirque du Soleil. It’s more about the 20 other companies and events that no one here would have previously heard of that were looking at North Carolina that are no longer coming.”

After weeks of back and forth, the U.S. Department of Justice filed a lawsuit in May against North Carolina saying the state violated the 1964 Civil Rights Act that outlaws sex-based discrimination. The state’s response was to file a lawsuit against the Justice Department saying the agency is trying to expand the definition of discrimination without a legal basis.

As the battle over HB2 plays out in the courts, companies looking for a presence in North Carolina, whether through a regional office or by investing in a commercial property, have either hit the pause button or completely shelved their plans. Brian Leary, president of Crescent Communities’ commercial and mixed-use business lines, says that the uphill climb North Carolina has to face is even tougher in today’s highly competitive business climate.

“Competition is so fierce for talent in these companies, and the world is so much smaller and people can move much easier. Giving companies and individuals a reason to take North Carolina off the list is something we can’t afford to do,” says Leary.

Because of the uncertainty, the participants on the “State of the Market” panel contend that South Carolina is the beneficiary of businesses that have spurned North Carolina.

“South Carolina and York County have people waking up every day looking for ways to compete [against North Carolina], and we need to do the same,” says Leary. “There’s a lot we can learn from South Carolina, but together we can compete against anyone. Once we level the playing field, we’ll be better positioned to do that.”

Gary Chesson, partner at Trinity Capital, and Ryan Clutter, senior managing director of HFF, were also on the panel and were a little more optimistic about North Carolina’s business climate moving forward. Chesson says that institutional investors are still investing in Charlotte and Raleigh because of their proven status as markets that provide attractive returns on investment.

“When capital retreats, [institutional investors] don’t want to be left behind holding the bag,” says Chesson. “While Charleston and Greenville have a lot of momentum, the place to be is the bigger markets in North Carolina.”

Clutter said that “jobs often follow the people” and Millennials keep moving to North Carolina in big numbers.

“Asking the Millennials in our office, none of them said that the restroom issue wasn’t an issue on why they moved here,” says Clutter. “That maybe an issue for the employer, but the employees are still coming here.”

— John Nelson

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