Charleston, S.C. Apartments Begin Slow Recovery
- May 06, 2010
Charleston, S.C.—As the local job market in Charleston, S.C. shows signs of improvement, the residential and commercial real estate sectors may be on the rebound.
Unemployment in the Charleston-North Charleston-Summerville, S.C. metro was 9.8 percent as of March 2010, according to the U.S. Bureau of Labor Statistics, down from its peak in January of 10.7 percent.
Tourism was impacted negatively during the recession, which resulted in a significant loss of jobs in the leisure and hospitality sectors—one of the largest parts of the local economy, according to Stephen Collins, associate in the Columbia, S.C. office of Marcus & Millichap Real Estate Investment Services.
“After shedding close to 17,000 jobs since the onset of the recession—more than half in 2009—the metro’s employers are projected to add approximately 3,700 workers this year, a 1.2 percent increase, with stronger gains anticipated in 2011 and 2012,” Collins tells MHN. Adding to this is The Boeing Company’s announcement that it plans to bring a new assembly plant to North Charleston, which is anticipated to bring stability to the market.
Though it’s yet to be determined whether these jobs will be short- or long-term positions, they will surely help to alleviate some of the stress on the apartment market, which is already showing signs of a recovery, albeit a slow one.
Year-over-year vacancy improved 20 bps, to 11.6 percent, “including a 70 basis point improvement in the first quarter of the year,” according to Collins. This is down from the metro’s 2009 peak of 13.3 percent, and vacancy is projected to reach 11 percent by the end of the year.
Approximately 1,000 units were absorbed from January 2009 to January 2010, which, Collins says, “represents a 3.9 percent increase in renter demand—outpacing the 3.7 increase in supply during that period.”
Only about 200 units are slated for delivery early this year, with fewer than 100 units under construction. After 1,430 units were added in 2008, completions slowed to 982 in 2009. Meanwhile, the planning pipeline consists of 863 units, though groundbreaking dates have yet to be announced.
In the first quarter of 2010, the metro saw a slight uptick in asking rents, though effective rents remained flat—and in some cases, were down slightly, due to the continued prevalence of concessions, reports Collins. In the first quarter of 2010, asking rents contracted 0.9 percent, with effective rents down 1.1 percent, or close to 4.8 percent of asking rents.
While there weren’t any transactions in 2009, two properties have traded thus far this year. Cap rates may be anywhere from 7 percent to 10 percent, up from its peak of 6 percent in 2004, Collins notes.
The slowdown in transaction volume stems from the gap between seller and buyer expectations, as well as a lack of distressed properties. “Sellers are not being realistic to today’s market and what the actual price is,” Collins points out. “Unrealistic owner expectations and a low influx of capital available [means] it’s just got to be a perfect deal to get done, unless you’re an all-cash buyer.”