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Condos reverting to apartments in soft market
By Kathleen Dayton
Staff Writer
Back when the housing market was hot, a strong investor market spurred a bevy of condominium projects and saturated the market with new condos.
As demand increased, apartments were converted to condos. Now that the housing market has cooled, some developers are seeing the need for rental units and the conversion is being reversed.
Alison Dailey spent 10 years specializing in condominiums. Now her company, Alison Daily Properties, is building the 72-unit Grand Oaks apartment complex at Haddon Hall in West Ashley.
“We originally started that as a condominium property and did a reverse conversion,” Dailey said. “We’re renting them as we speak.”
Dailey said that as land prices escalated with the sizzling housing market, attached housing became more affordable.
“That’s why we saw all the apartment conversions,” Dailey said. “As a result, bingo, the market’s flooded with condos.”
Investors also entered the marketplace when real estate began appreciating rapidly, adding to the demand for condominium units.
“When the investor market went away, now we have all these apartment conversions,” Dailey said. “We have a lot of condos on the market.”
Philip Ford, vice president of the Trident Home Builders Association, said the condominium market has been harder hit than other real estate segments as the housing market has cooled.
That doesn’t mean the condo picture is completely dim.
“It’s like anything,” Ford said. “The housing market has dropped off for single-family detached homes, but some builders are selling them better than others. You may have pockets or locations that are selling well. It could be price, it could be location. For people who want to get out of renting, I think condos are a great option.”
At The Regatta, a gated condominium community on James Island, price and location could be the reasons that 70% of the units have sold since they went on the market a year ago. The complex is a short distance from downtown Charleston and priced in the $140,000 and $230,000 range.
“You can walk to the movies, and it’s new,” said Andy Parzygnat, director of sales for Coldwell Banker The Condo Store, which is marketing The Regatta along with two other condominium communities, Twelve Oaks at Fenwick Plantation on Johns Island and Madison at Park West in Mount Pleasant. The agency in July sold out its Southampton Pointe condominiums on James Island.
“That’s a lot of business for us in these times,” Parzygnat said. “In any time, that’s a lot of business.”
The Regatta is just off Folly Road and a short hop from the James Island Connector, which empties into downtown Charleston’s medical district, not far from the College of Charleston.
“We happen to be in a great location here at The Regatta to get to everything in Charleston,” Parzygnat said. “The No. 1 buyer, I think, is the single professional female under the age of 40, who loves the security of this property because it’s gated, and it’s new. Everybody loves new. We have teachers, medical professionals, bankers and lawyers, and they go right downtown.”
Other buyers attracted to the condominiums include retirees moving from other parts of the country and young married couples, Parzygnat said.
Elliott Hutson, a Prudential Carolina real estate agent who is selling condominiums at One Belle Hall in Mount Pleasant, said condo buyers are still out there, they are just taking their time.
“Before, they knew they had to jump on board,” Hutson said. “We were selling four a month, and now it’s one or two. The buyers are there and the incentives are there, but to me the urgency isn’t there as much. They know they can go down the street and look at another unit that might be priced lower.”
Hutson previously worked with Atlanta developer Terwilliger, Davis & Leadbetter who planned 59 condominium-style townhomes at 400 Meeting St. That project is now on hold, Hutson said.
“They own the land, and they have another year and a half to break ground on it under city ordinances,” Hutson said. “They know it’s a good piece of property. They’re not going to lose any money on it.”
Other condominium projects that have been put on hold are 181 units called Station West that Beazer Homes planned to build at the intersection of Folly and Albemarle roads. Monarch Development had plans to add 280 condos to its redevelopment of the old Shipwatch Square shopping center on Rivers Avenue in North Charleston, but now is concentrating solely on the commercial aspect of the center.
Greg Kennedy, a Prudential Carolina real estate agent who is selling live-work units at Shelmore Village in Mount Pleasant, said prices recently were dropped 10%.
“Now we’re starting to see some low-hanging fruit,” Kennedy said. “Our target customer is different from the regular condo buyer. We’re looking for someone who might want to move down to King Street and have a business and live above, but it costs more to live there.”
Kennedy said 25% of Shelmore Village’s 41 units have sold since last year, although the model unit just opened three months ago.
“The tri-county has sold over 10,000 homes this year,” Kennedy said. “It’s robust, it’s just not as robust as two or three years ago.”
On Daniel Island, sales of condominiums and single-family homes seem to be evenly paced.
In the past six months, condo sales have accounted for approximately 50% of Daniel Island Real Estate transactions, with home and home site sales making up the other 50%, said communications director Julie Dombrowski.
“In some cases, condominiums provide a foot in the door, especially for young families who want access to the schools and other family-friendly amenities here,” Dombrowski said.
Parzagnat remains upbeat about condo sales and said the Lowcountry market is much stronger than neighboring Georgia or Florida.
“You see developers putting incredible incentives out there,” Parzygnat said. “I think there’s room for more condos, in the right price points, and in the right areas.”
Kathleen Dayton is a staff writer for the Business Journal. E-mail her at kdayton@setcommedia.com.
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