Breaking Ground in Southeast Markets in 2017

While demand for dense developments provides the opportunity to break ground in new markets, there are unique challenges in doing so.

John Darby_Headshot_High ResRapid growth in a number of Southeastern U.S. cities has put a strain on their infrastructure. Some cities welcome the idea of denser developments to prevent sprawl and the various problems it causes by building multifamily developments that reduce traffic congestion and the need for more infrastructure. While this demand provides the opportunity for developers to break ground in new markets, there are unique challenges in doing so.

Here are three questions to ask before breaking into a new market in the Southeast.

Is the Project Viable in This Location?

When assessing a location, look at rental markets and the difference between what a new building would rent for compared with a B or C product. If there is a big gap between the two, dig a little further. Use available data to assess rental growth, employment and absorption. Then, look at what is proposed, what is under construction, how many units and how many square feet are coming online that cycle.  If you can build your product and get absorbed and get the right rents so it is a good investment, then that’s a good sign.

Once the initial questions are answered, start assessing available locations. There will be unique challenges with any location, from rezoning to environmental issues. Because the market is so competitive, companies must be selective when considering a location because renters have many options and rely on many different factors in deciding where they want to reside.

Is the Local Government Open to Dense Projects?

It’s important to get the pulse on the projects under development in any city. Some local governments welcome dense developments, while others thwart development at all costs by holding up permits, requiring unrealistic design approvals or changing the zoning. Time is the only thing between getting a project planned, permitted, built and stabilized, so trusting the process in place is crucial.

A great example of this is Cardinal Newman, a project we are working on in Forest Acres, S.C., that has spurred the local government to make long-overdue infrastructure upgrades. The development will add roughly 250 apartments and approximately 45,000 square feet of retail space on a 12-acre site. The city used the development as an opportunity to get a funding source to address some issues that need to be addressed, such as automating traffic signals. City planners designated the area that includes the Newman project as a multi-county business park. The designation will allow the county to use the increased tax revenue over 10 years to directly pay back funds borrowed to make the infrastructure improvements.

Is Someone Willing to Invest?

Consider an area with investors who are interested in creating a presence in that city. Financial institutions spend a significant amount of time researching cities, so make sure they’ve identified the city as one they want to be in. Unless an investor views the city as a top investment spot, the project may not be financially viable.

If you decide to break ground in a new market, it’s critical that your company be straightforward with its plans for the site every step of the way. Do what you say you’re going to do. No one can predict the future, but you can do your best to deliver a project that will benefit a community for generations.

John Darby is the CEO of The Beach Company, headquartered in Charleston, S.C. The Beach Company has five generations of family ownership with development projects spanning across the Charleston area and the Southeast region. The Beach Company upholds a tradition of establishing landmark properties and communities by evaluating each development opportunity for its potential to improve the quality of life for its neighbors, and contribute to the long-term economic vitality of the Charleston Lowcountry and the Southeast region.