With a near-record number of rental units sitting empty throughout the region, apartment builders have retreated to the sidelines.
Construction work on new rental complexes has all but come to a halt while developers wait for renters to soak up the estimated 4,055 vacant units in the Charleston area, according to Real Data.
The Charlotte-based real estate research firm put the region's apartment vacancy rate at 13.7 percent, the second-highest since the recession began more than two years ago.
The poor market conditions have made it difficult for developers to borrow money to finance new apartments and most other commercial real estate projects.
That, in turn, has further crippled the local building industry, which has seen its workforce shrink by about one-third amid the slowing economy and real estate downturn.
"Commercial, residential, even institutional (construction) is at such a low level it's almost incomprehensible to believe it's gotten to this point," said Will Danielson, president of the Charleston Contractors' Association.
But national data suggest that the multifamily market is beginning to stabilize. Newly released figures from Reis Inc., a New York research firm, found that the nationwide apartment vacancy rate held steady at 8 percent during the first three months of 2010 after increasing during the previous eight quarters.
Another measure shows that new rental units were being leased at a faster pace than previous quarters.
In the Charleston area, multifamily permits, along with single-family residential permits, peaked at 2,734 units in 2005, according to the U.S. Census Bureau. Demand for permits has since slowed dramatically. The bulk of the activity now is from developers finishing projects.
A recently published economic forecast by the Charleston Metro Chamber of Commerce's Center for Business Research calls for only 210 new multifamily building permits to be issued this year and 184 next year.
The pause in construction activity has an upside, experts said.
"Since there's no new development, the apartment communities will fill up," said Andrea Barbarino of Real Data, whose firm surveys the Charleston area rental market twice a year. The findings do not including senior housing, low-income housing and rental complexes smaller than 50 units.
The region's apartment vacancy rate climbed into double digits about six months after the recession started, in mid-2008. It was the first time that had happened in seven years.
In its latest survey, Real Data said Goose Creek had the highest vacancy rate at 16.5 percent. The North Charleston and downtown Charleston market was next, at 15 percent, followed by West Ashley (14.8 percent) and James Island (13.7 percent).
Monthly rental rates for the region remained steady at about $750 during the past year, according to the survey.
Cathy Hontz of the Charleston Apartment Guide said local rental agents already have reported an increase in leasing activity as the $8,000 federal tax credit for homebuyers is about to expire at the end of the month and as families move into the area in search of job opportunities.
Some renters, she said, are wary of purchasing a home, which could help bolster rents and occupancy rates.
"We are going to have a generation of renters who are going to wait longer to buy," she said. "They don't want themselves to get into a real estate mess because they watched their parents bleed."
Some developers are getting ready to build once apartment demand picks up and commercial lending loosens.
Construction crews in North Charleston are preparing the site work for the West Yard Lofts, a 60-unit complex on the former Navy base that could be finished by the end of the year.
Also, The Spanos Corp., a California company, recently secured approval from a Charleston board to move forward on a 319-unit complex near Interstate 526 and Clements Ferry Road.
And at least two affordable-housing rental projects are under way, with the help of federal stimulus money. This week, the Humanities Foundation broke ground on the 72-unit Grandview Apartments in West Ashley, which is one of two projects the Charleston-based nonprofit housing developer is undertaking.
Reach Katy Stech at firstname.lastname@example.org or 937-5549.