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Downtown Charleston is Booming with High-End Multifamily Deliveries

Posted By Roy Parker @ Jul 30th 2018 12:14pm In: Real Estate Investing

The city of Charleston, SC takes pride in its historical foundation and has resisted development in the name of preservation. Until recently, that is.

Charleston has had an incredible multifamily construction boom, with plans set to double the current inventory downtown by the end of the year. All of this new construction has created opportunity for investors to add to the city’s limited selection of high-end multifamily housing, while simultaneously pushing rent growth in existing projects to historical highs.

In 2015, in an effort to increase economic development, the Charleston City Council moved forward with an incentive-based development program, identifying the Upper Peninsula as fair game for new projects. The amendment allows for taller and denser buildings, as long as the communities provide environmentally sustainable features.

Since then, more than 15 properties have been announced, with two already delivering this year. Most of this new construction is located north of the College of Charleston, away from the city’s most popular attractions and historical gems. However, some of the new luxury apartments are located as close as two miles from French Quarter.

The Guild delivered in March and is located minutes from the tip of the peninsula. In Westside, the Caroline also opened in March as the first phase of the WestEdge live, work, play master-planned development. WestEdge is less than a mile from the Medical University of South Carolina campus, which employs over 15,000 people, and runs along Brittlebank Park on the Ashley River. Both projects offer high-class amenities, such as pet spas, wine tasting rooms, rooftop pools, community bicycles and most units have condo-style finishes.

Average rent for these luxury apartments is more than $2,300 per month, which is 50 percent more than new rental units in other areas of Charleston, and double the rate of a typical apartment.

These recent deliveries in the high-end multifamily market have driven vacancies up to nearly 30 percent, though this is not a true reflection of multifamily demand. There has simply been a substantial amount of inventory added to a relatively small inventory base. New projects have been leasing at an average absorption rate of roughly 14 units per month, and vacancies are expected to fall closer to Charleston’s typical levels.

Rents for 4- and 5-Star units have also grown significantly since the new deliveries by nearly 12 percent over the past year alone. Over the past few years, high-end inventory rented for around $1,650, but now average rents are pushing $2,000. With all of this additional construction in the pipeline, however, competition will likely steady this extreme growth in the near future.

Meeting Street Lofts is the next major development scheduled to deliver, in September, and offers similar amenities to Caroline and The Guild. The 4-Star building is comprised of mostly studio-style apartments, and units are priced in line with these elevated market rates.

CoStar Market update by Jesse McConnico July 27, 2018

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