Apartment market slumps

Complex owners jump through hoops to woo potential renters

So many housing units, so few people looking to move.

While thousands of local homeowners compete for buyers in a slow real estate market, apartment complex owners are having to roll out the red carpet to attract renters.

Charles Dalton, a research analyst with Charlotte-based Real Data Apartment Market Research, painted a cautiously guarded picture for local apartment managers and developers on Thursday.

His firm found that the vacancy rate across Charleston is a steady 9.6 percent. That's the same rate as last year but 2.2 percentage points higher than in 2006.

Dalton predicts the figure will climb into double-digit territory this fall, once the industry's busy season ends.

"It's a recession-type environment. ... You have to be cautious," he said.

As a result of the rising vacancies, Dalton said, the area's median rent is projected to grow at an extremely slow pace or even stagnate.

Some complexes already are offering hundreds of dollars in discounts and other incentives, he said.

The impact will vary by area. James Island and Mount Pleasant, which have seen less multifamily development, likely will be more sheltered than the construction hotbeds of Goose Creek, Summerville and West Ashley.

The local apartment industry still is feeling the effects of the conversions of rental units into condominiums in recent years. On paper, those sales lowered the supply of rental units, but the reality is that many of those units were bought by investors and then rented out again.

That artificial drop in supply attracted new development.

According to Dalton's research, multifamily builders have proposed to build slightly more than 3,000 units before 2010.

Much of the new construction is concentrated in two main areas: the Ladson Road corridor, between Summerville and North Charleston, and in West

Ashley, along Bees Ferry Road and Glenn McConnell Parkway. Supply is expected to outpace demand during the next two years, especially in West Ashley, Dalton said.

Another factor affecting the market is the fact that the condo conversion trend has gone cold.

It's been estimated that more than a dozen local proposed conversion projects failed to sell out, so in many cases the unsold units have been placed back in the rental pool, increasing supply.

Just last week, two more properties followed this path, said Cathy Hontz, publisher of the Charleston Apartment Guide.

Apartment demand is tied closely to the health of the local economy. Based on the region's projected job growth during the next two years, Dalton's firm determined there's a need for only 800 new units.

"I think that will get lenders and developers to start to question their time-lines," he said.

Reach Katy Stech at 937-5549 or kstech@postandcourier.com.

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