At one time it was a recipe for a housing boom: Movers and shakers rolling out higher-paying jobs suitable for a youthful labor force, which then spend earnings on new homes. But today’s younger employees and job seekers often favor rentals.
“The population explosion of millennials in Charleston could be the major factor behind the current multifamily-project explosion,” says broker Jered Wilkerson of NAI Avant commercial real estate firm in Charleston, who compiled a report on the apartment home market in the Lowcountry.
A recent Forbes article, he says, estimates that 86.4 percent of 18-34 year old “millennials” nationwide rent instead of own. That’s a record.
Rising home costs influence the all-time-high lease share rate, he says. The median home price in metro Charleston, for example, grew from $217,000 to more than $235,000 year over year.
“With job growth comes housing demand,” Wilkerson says.
But there’s more. According to the magazine piece, millennials prefer leases for four reasons. The younger adults show love for modern rental amenities such as electric car chargers, gyms and blanket cell reception; they enjoy communities’ social events and shared kitchens or coffee bars; they like the flexibility of leaving for any reason including career; and they savor the convenience of avoiding the “maintenance costs and honey-do lists of ownership.”
Wilkerson urges observers to “keep an eye on the area’s upcoming multifamily projects,” suggesting that developers will outpace each other in featuring their best in terms of apartment draws for 18-34 year olds.
The surge in millennials’ numbers arrives as the Charleston economy hits stride with major plant deals, notably Boeing disclosing an expansion, Volvo revealing its up to $500 million investment in a new plant in Ridgeville and Mercedes-Benz planning to build a half billion dollar Sprinter van operation in North Charleston.
The three projects alone account for more than 3,400 jobs produced.
According to Real Data Apartment Market Research, the Charleston area touts rental inventory of 32,904 units, with 2,204 empty units.
“Vacancy rates remain steady at 6.7 percent even as new units are brought online,” Wilkerson notes. The present lease rate in metro Charleston stands at a “strong” $976 per apartment home. The rental rate’s rising at $1 per square foot, the third highest in the Southeast.
Demand for apartment dwellings “continues to drive new development within the Charleston market,” he says. Builders are ramping up 3,700 rental homes with another 5,785 units planned and approved.
Along with stable rent totals, apartment home communities are becoming investment draws.
East Central Lofts on Huger Street sold for a high of $12.4 million this year. All told, multifamily sales racked up $156 million on 1,242 units sold. That amounted to average sales of $126,000 per unit through April, Wilkerson says.
“With rising land costs, high barriers to entry, and an arduous regulatory approval process, investors are seeking returns in older building and complex redevelopments and renovation projects,” Wilkerson also noted.
He singled out four properties for sale in the Charleston market:
• Paces Watch Apartments, a 232-unit complex in Mount Pleasant. Its list price was not undisclosed.
• Waverly Place, 244-apartment-home complex in North Charleston on the market for an undisclosed price.
• Palm Pointe, 110-unit complex in North Charleston listed for $10.2 million.
• Grove at Fenwick Plantation, an 80-unit complex on Johns Island priced for $6.9 million.
Wilkerson also sketched out the greater Charleston rental market by region.
Downtown peninsula, he says, is going through a “dramatic change” in terms of visual gateways. That will impact “how people will arrive into downtown.”
New sites include student housing at 930 NoMo just off the Ravenel Bridge, Westedge’s “premier” mixed use development and The Post and Courier’s Courier Square to greet entrants on King Street.
As it “strengthens its resolve to minimize impact,” Mount Pleasant has become a harder place for apartment and mixed-use developments to get off the ground, Wilkerson says.
Property owner Heitman plans to add 105 apartment homes at the Boulevard, which changed hands last year for $66.5 million. Bridgeside at Patriots Point expects another gateway property.
The Grove at Carolina Park counts 280 planned rental homes, to be the first of 2,030 multifamily units for the master planned Carolina Park community. The Beach Co. is seeing “new renters each day” at 252-apartment home Riviera at Seaside Farms, and 300-unit Haven at Midtown looks to be Mount Pleasant’s “newest mixed-use attraction,” Wilkerson says.
North Charleston angles to fill the gap between “the Summerville/Nexton corridor and the peninsula’s high barrier to entry,” the broker says, adding that the city is ready for a spike in apartment development growth.
Projects include Jamestown Properties’ Flats at Mixson to add 60 units, three developments including the Atlantic on Rivers producing 585 rental homes and Beach Co.’s The Factory at Garco Park becoming the first large scale apartment project at Park Circle.
Elsewhere, Woodfield Partners launched 290-apartment-dwelling Cooper River Farms on Daniel Island, Shade Tree Apartments will include 11 buildings with close to 250 units on Maybank Highway on Johns Island, 300-dwelling Crowne at Maybank Village will be a “crown jewel” on Maybank Highway and Broadstone at Folly Beach expects to add 296 units near the ocean.
Meanwhile, Woodfield Partners put 280 apartment homes under construction at The Standard-James Island and 284-unit Springs at Essex Farms has started leasing west of the Ashley.
Driving the Summerville and Goose Creek market is the master planned Nexton community, “transforming the I-26 and Main Street intersection as businesses and residents come in droves,” Wilkerson says. Beach Co. and MWV’s 320-unit Parks at Nexton has started leasing. Also, Applegate & Co. opened the $26 million Arbor Village Apartments last fall, housing 240 units.
For more, visit www.naiavant.com.
Reach Jim Parker at 937-5542 or firstname.lastname@example.org.