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Charleston region to continue to grow, but pandemic clouds forecast, economist says

Morrison Yard under construction

Construction is underway on the 10-story, 386-unit Morrison Yard apartment development on Morrison Drive on the Charleston peninsula. Work is expected to be completed in 2022. Warren L. Wise/Staff

It's hard to predict the future, and it's even harder with scant historical context from a catastrophic event.

That's more or less the bottom line from College of Charleston economist Frank Hefner in his assessment of what the commercial real estate business can expect in 2021.

"The main theme is uncertainty with question marks all over the place," Hefner said at an industry function last month.

Charleston will likely continue to grow, he said, as newcomers continue to move to the region, bringing with them wealth, businesses and demand for homes. But making predictions beyond that with any degree of certainty is more of a challenge.

Frank Hefner College of Charleston

Frank Hefner is an economist at the College of Charleston. Provided

"Anyone who thinks they can make a reasonable forecast is stretching the limits of what to expect," he said.

Hefner pointed out no other recent shocks to the economy offer any historical parallels to the coronavirus.

He also cited the pandemic from a century ago, saying he could find nothing about it to compare the financial impact from that health crisis to the current downturn.

Another wrinkle is that economies typically head into a recession because of a specific economic collapse or a major financial shock, such as the oil embargo in the 1970s.

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"This is an organic event," he said of the downturn triggered by COVID-19. "There were no bad policy decisions that made this happen. This is completely a strange animal in that sense."

Some businesses — home repair stores, supermarkets and drive-thru restaurants, among others — have flourished during the outbreak, providing some stability for commercial real estate owners. Also, construction, manufacturing and home sales have roared back from the spring stay-at-home orders.

But hotels, sit-down dining establishments and entertainment venues have suffered. And the unemployment rate remains elevated, which could be a drag on a 2021 recovery if restaurants and other businesses adversely affected by the virus don't replace the jobs they've lost.

With help from online purchases, the state's sales tax revenue did not take a hit, but because people are traveling less, the gasoline tax collections that help support road construction will be down, he said. Also, the accommodations, or hotel tax, is off, too, as tourists haven't fully returned to pre-pandemic levels.

He also believes the amount of money being pumped into the economy will eventually lead to inflation and higher interest rates, but he doesn't predict when that will happen. 

Port traffic continues to be strong, and business license applications continue to grow, but the future of the office market is cloudy. Still, Hefner believes demand for cubicle space isn't dead.

"I don't see the interface of people working together disappearing completely," he said.

Reach Warren L. Wise at 843-937-5524. Follow him on Twitter @warrenlancewise.

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