Construction cranes (copy) (copy) (copy)

Scenes like this have been common in recent years in Charleston as the construction boom and wave of new businesses washes over the region. File/Staff

Fifteen years ago, the Charleston region's population stood at about 550,000, the number of visitors closed in on 4.4 million and the number of breweries serving up suds could be counted on a couple of fingers.

Nobody shopped much above Calhoun Street in the downtown area, James Beard was not a common name outside the restaurant industry and the Holy City never made a travel magazine's nod for top tourist destination in America, much less the world.

Today, the number of residents calling the three-county region home stands at close to 800,000, about 8 million tourists visit the region each year and more than two dozen breweries quench the region's thirst.

Upper King Street has been totally transformed with hotels, restaurants, apartments and shopping venues. The restaurant industry is flush with James Beard winners. And Charleston has topped the list of best cities to visit in America too many times to remember.

That was an assessment of the area's changes by Jeff Yurfest of The Shopping Center Group during a recent commercial real estate forecast for the new year.

The last recession crimped development everywhere, but since then, the addition of Boeing making jetliners in North Charleston, Mercedes Benz building cargo vans in Palmetto Commerce Park and Volvo manufacturing cars in Berkeley County have helped to change the region forever.

That trifecta isn't expected to happen again anytime soon, but because of those industries and the city's bustling port, Charleston's commercial real estate market is better positioned to weather the next economic downturn than other areas, according to a national economist.

'Rolling along'

Despite some headwinds, a downturn is not in the forecast for the foreseeable future.

"Going into 2019 and 2020, there is sufficient momentum to continue to grow," said Lawrence Yun, chief economist and senior vice president of research for the National Association of Realtors.

"Charleston is on much better ground than bigger cities," he said. "If there is a downturn, it will be very modest because of market conditions (in the region). The indicators of a recession are just not there."

Oil prices aren't a factor since the U.S. has become the largest oil producer in the world, companies are flush with cash, and they are not overborrowing, Yun said.

"The economy is rolling along very nicely," he noted. "Charleston is one of the stars in the country for job growth."

But there are worries.

On the horizon

If the Trump Administration's tariffs lead to a full-blown trade war, "Boeing will sell fewer airplanes abroad and BMW will ship fewer cars through the port," Yun said. If the president negotiates a better trade deal with China, he said it will be good for the U.S.

He also noted construction jobs have not fully recovered and the shortage of skilled labor at a time with the lowest unemployment rate in decades is slowing building activity.

Interest rates will continue to rise, perhaps twice in 2019, pushing long-term mortgages to about 5.5 percent, which Yun said was "still historically very favorable."

He noted the Charleston region's home sales for 2018 are on par with 2017's record-setting pace, but the area's home prices continue to outpace the rest of the state, creating an affordability issue.

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Ferry Wharf (copy) (copy)

Mike Bennett of Bennett Hospitality of Charleston unveiled the 18-acre, $325 million Ferry Wharf development in Mount Pleasant last October. Rising in the background are a new five-story office building called Portside and a parking garage to its right. In front of the parking deck, a 175-room Embassy Suites Hotel will be built. File/Brad Nettles/Staff

On the apartment front, Yun said the region's activity is robust, but new developments opening in the new year are likely to boost vacancy rates somewhat, echoing a refrain across the multifamily industry.

Retail and office sectors are expected to continue to do well, he said.

Chasing yields

A regional developer also is bullish on the region's economy.

"It's a very positive picture being painted of Charleston, but there are some threats," said Derek Mathis, senior vice president of Charlotte-based SunCap Property Group, which has completed a handful of large industrial projects in the local area.

Mathis noted investors are chasing yields in high-growth Charleston.

"Developers from all over the map are investing here," he said. "Industry and multifamily are still the darlings."

As for possible threats, he pointed to business prospects looking elsewhere unless Charleston gets a handle on providing housing for people at entry level jobs and securing skilled labor to fill employment needs.

He also pointed to the cost of construction in the Charleston region and noted the complexity of the development process as an impediment to growth.

"I don't think we can stick our heads in the ground on the fact that we have an issue," Mathis said.

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Beach Co. spec building Palmetto Commerce Park (copy)

The Beach Co. and Samet Corp. are building a 196,000-square-foot speculative building in Palmetto Commerce Park in North Charleston, an example of some of the new industrial development in the Charleston region. File/Warren L. Wise/Staff

He referred to the development permitting process taking up to nine months in Charleston and Berkeley counties while it is about three months in Spartanburg County.

"Developers are going to take the path of least resistance," Mathis said. "Four to five months can make a big difference."

Anti-growth sentiment also can come into play, especially if governments pull back on incentives.

"If (developers) think it's too hard to do business, they will look elsewhere," Mathis said. "I would hate to see us as a region miss these opportunities."

Great expectations

Mack Reese of Atlanta-based Gateway Ventures, which is developing the WestEdge project on the Charleston peninsula, also noted challenges in the region.

"It is expensive to build here," he said, referring to the length of time to get a project through the maze of government regulations on top of land prices.

"Charleston is going to need to improve its transportation system," he added.

Stephen Zoukis, CEO of the Raven Cliff Co. which redeveloped the Half Mile North project and the Pacific Box & Crate area on Charleston's upper peninsula, said growth will continue but warned of over-investment in the region.

"There is too much money coming into a small market to absorb it," he said.

If a downturn comes, he believes some won't be able to walk away unscathed.

For Charleston to continue to prosper, Zoukis said Charleston has to fix its flooding problem and mass transit is a must.

"We have an opportunity to do something great," he said.

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