🌪️🌪️ Charleston Multifamily: Twisting and Turning in Q2! 🌪️🔥🌪️🔥🌪️🔥
PAUL'S MARKET JOURNAL
I track all multifamily properties within a 48.4 mile radius of Charleston, SC. Before I jump into the specific market data, I’d like to take a moment to educate everyone on the Charleston Metro Area:
Demographic Information
The Charleston Metro Area has demonstrated steady population and wage growth since 2018, indicative of a robust economy. However, the prevailing data point of the current housing ratio suggests a tightening housing market expected to intensify by 2028, leading to heightened rental rates and housing competition.
This trend holds significance for both current and prospective property owners in Charleston. Existing owners can anticipate property value appreciation and increased rental income potential. Opportunistic investors could find possibilities in real estate ventures, capitalizing on the expected appreciation in property values.
Nonetheless, concerns about housing affordability may arise for lower-income individuals amidst rising housing costs. Thus, strategic planning is crucial for navigating the evolving real estate landscape in Charleston, considering both opportunities and challenges presented by the tightening housing market.
Charleston's employment growth has been robust, adding over 46,000 jobs since 2020—a 12% increase, significantly outpacing the national average. Key sectors driving this growth include manufacturing, logistics, and professional services. The Port of Charleston remains a crucial economic asset, with a 13% year-over-year increase in TEUs handled as of March 2024, following substantial investments.
Source: CREXI
The Current Multifamily Real Estate Market
Charleston Multifamily Market Recap for Q2 2024
In Q2 2024, the Charleston multifamily market exhibited notable resilience and optimism despite various challenges. The vacancy rate reached 9.6%, slightly above the national average but consistent with the area's 10-year historical trend. This increase was driven by the addition of over 3,400 units in the past year, with another 5,400 units currently under construction.
Rent growth remained positive, recording a 1.0% year-over-year increase. This recovery is significant, especially compared to larger regional markets like Charlotte and Atlanta, which have experienced negative rent growth. Notably, net absorption outpaced new deliveries for the first time in two years, underscoring strong demand for multifamily units.
Construction activity has decelerated due to higher interest rates, but this slowdown may help balance the market by reducing supply pressures. Key developments include luxury mid-rise units in Downtown Charleston and larger units along the I-26 corridor. Submarkets such as Summerville/Goose Creek and Daniel Island have seen significant growth, with thousands of units delivered or in progress.
Investment in multifamily properties has declined, with a 50% year-over-year drop, totaling approximately $516 million in the past 12 months. Despite this, the average price per unit has increased to about $220,000, a 20% rise over the past five years. Cap rates for institutional deals have also risen, now in the low-to-mid 5% range from the high 3% range in 2022, reflecting a market adjustment.
Submarket performance varied, with Downtown Charleston maintaining the highest rents, averaging $2,500 per month, despite facing inventory pressures. North Charleston experienced stronger-than-average rent growth, driven by demand for mid-priced housing near industrial areas. In Mount Pleasant, a continued moratorium on new multifamily developments has limited new supply, resulting in higher rent growth.
Overall, the Charleston multifamily market has demonstrated resilience amid supply pressures and economic shifts. With strong absorption rates, steady rent growth, and strategic developments across key submarkets, the outlook for the second half of 2024 remains positive.
Charleston- a market of Resilience
As a market enthusiast, I focus on tracking multifamily properties within a 48.4 mile radius of Charleston, SC. Charleston's demographic data highlights steady population and wage growth since 2018, but the tightening housing market, with an increasing housing ratio, signals heightened rental rates and competition by 2028, affecting both current and prospective property owners. While existing owners may see benefits like property value appreciation, strategic planning is essential for navigating the evolving real estate landscape, considering potential challenges in housing affordability for lower-income individuals.
IN THE NEWS
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