Sustained jobs growth driven by the state’s stirring economy helped to fill rental properties in the three largest metro areas; even the high-powered Charleston area struggled to keep pace with new construction.
Still, the Lowcountry looks to be uber-busy in 2019, as new multifamily mid-rises are set to reach the highest point in close to two decades.
The upbeat outlook stems from the third quarter apartment report of Marcus & Millichap, a national commercial investor and information provider. The firm profiled greater Charleston, Columbia and Greenville-Spartanburg in its survey, while reaching into the current fourth quarter and next year to forecast future growth.
"Demand outstrips supply additions as construction pipeline thins in some markets," the company's report headlines.
Jobless rates for the state's three largest metro areas all dropped below 3.5 percent in the July through September period as employers continued to hire. That boosted housing demand including rentals in the past year, tightening vacancies in each market.
The pace of employment growth in metro centers has tailed off in the fourth quarter but vacancies remain low, Marcus & Millichap noted.
Greenville-Spartanburg noticed an easing in apartment "deliveries," when projects are completed, and anticipate the same trend next year. Columbia likewise expects a dip in finished developments and "further compression of the vacancy rate."
By contrast, greater Charleston expects surging rates of apartment completions. But that will trigger a climb in vacancies over the next 12 months. The outcome will be empty units topping 6 percent in 2019 for just the second time in seven years, the researcher said.
The multifamily forecast of the three metro areas for 2018 found Columbia with the highest vacancy rate at 6.2 percent, Greenville-Spartanburg at 5.8 percent and Charleston, 5.6 percent. All three locales saw declines from the same time last year. Charleston posted the highest effective rent at $1,122 a month, up 3.8 percent year-over-year; while Columbia, up 3.1 percent and Greenville-Spartanburg, up 3.7 percent, tied in lease prices at $907 a month.
By region, central Columbia, Lake Murray and north Richland County were strongest in terms of Midlands apartment investors, downtown Greenville and Greenville/Mauldin lead the Upstate and downtown Charleston, North Charleston and Summerville/Goose Creek headed the coastal area as it remained attractive to Northeastern investors looking for higher first-year returns.
In greater Charleston, builders completed 3,800 apartment homes in the year ending Sept. 30 with close to half in the downtown, Mount Pleasant and islands submarket. Developers count 5,300 units under construction now that are slated for 2020 completion dates.
Third quarter vacancies averaged 5 percent in the Charleston area, as high as 5.7 percent in Summerville and northwest Charleston and as low as 4.2 percent in North Charleston-Goose Creek. Overall rents averaged $1,140 in the quarter, from $979 in Goose Creek and North Charleston to $1,434 in downtown-Mount Pleasant-islands.
The Lowcountry's investor activity is a mixed bag. Deals are up 50 percent in the past year with the strongest increase in properties priced $10-$20 million. Average price per apartment home stabilized at around $115,000.
"A limited number of properties available for trade will continue to weigh on activity," Marcus & Millichap pointed out.