By Sarah G. McC. Moïse
Staff Writer

Charleston has not only risen above a nationwide surge in the condominium market, with a 33% increase in sales from the previous year, but has also managed to escape the national trend of sluggish apartment rentals.

According to the National Association of Home Builders’ latest Multifamily Market Index, released at the end of 2003, numbers of for-sale units inched up just slightly from the second quarter to the third, continuing an upward trend seen since the first quarter of 2003. Condominium sales remained strong in the third quarter, but demand for rental apartments continued to lag.

Supply and demand

David Nelson, real estate agent for The Beach Co. says, “On the whole, condominium sales are exceeding all our expectations.”

With the combination of low interest rates and the low price of condos compared to single-family homes, Nelson says, “People are seeing they can afford to own rather than rent; that is partly why the market is so strong.”

Supply and demand also has something to do with it. Nelson says that previously there was a lack of condominium production in Charleston. “Charleston was not really a retirement community until the last several years.”

Nelson describes the typical condo owner as someone who has raised children, already owned a big home and is now looking for a nice place to live with easy maintenance. “Now, we have an influx of new people and an onslaught of condominiums that have been built,” he says. “We didn’t have that type of client or the right product before now.”

In the first nine months of 2003, condo sales increased nationally almost 13%, according to the National Association of Home Builders. Existing condo and co-op sales rose an unprecedented 12.9% to a seasonally adjusted annual rate of 971,000 units sold during the third quarter 2003 (July to September), up from the previous record of 860,000 during the April to June quarter.

Locally, the Multiple Listing Service shows that in 2002, there were just 760 condominium units sold in Charleston County. As of the end of 2003, there were 526 units on the market, 1,014 sold and 105 pending—a 33% increase.

Penthouse views

 “Our market is strong in all fields, single family as well as condominiums,” says Lenora White, an agent for Daniel Ravenel Real Estate Co. “But the real action is in the higher priced, luxury condominium market that is well located and well built—like One Vendue, Factor’s Walk, Laurens Place, Dockside and Chisholm Place.”

White explains that, specifically, high priced condominiums are the highest appreciating part of the local market. “Charleston has limited luxury sites with multi-family zoning, particularly with waterfront views.”

While comparing local MLS market data to the National Association of Home Builders statistics, White draws a parallel as downtown condo sales steadily increased during each quarter. In the first quarter of 2003, there were 24 sales: 26 sales that closed in the second quarter and 40 in the third quarter. “There were 84 sales in the first three quarters of 2002 and 90 in 2003,” she says.

But the interesting comparison is that in 2002, there was no sale over $1 million in those first three quarters; while 2003 saw a three-bedroom, 3,200 square-foot condo sell for $2.85 million at One Vendue Range. “Vendue Range raised the bar on location and quality of condos downtown,” says White.

National drop in rentals

In contrast to the booming condo market, nationally, numbers of affordable rental apartments continued on a downward drift from the previous quarter and the starts index for market-rate apartments remained virtually unchanged. The Multifamily Market Index also indicated continued weakness on the demand side for rental apartments. Both calls from prospective renters and effective rents dropped from the previous quarter. The percentage of apartments rented within the last 90 days was also down, from 67.7% in the second quarter to 57.9% in the third quarter.

Despite the increase in homeownership, Charleston has actually shown improvement in the rental market over the last two years—according to Charles Dalton, president of the Charlotte-based real estate market research firm, Carolinas Real Data. “In July of 2003, Charleston’s vacancy rate was 7.6% for conventional apartment communities, down from 10.2% in 2002,” he says.

Dalton believes the building boon in 2000 and 2001 created more supply than demand, resulting in the high vacancy rate of 10.2%. “Charleston’s apartment market has been improving, because over the last two years, it has completed 2,500 new apartment units. Over the same time period, the demand, which is measured by absorption, has been over 3,000 units,” says Dalton.

Charleston’s data goes against what regional metro areas like Raleigh, Charlotte, Greenville and Spartanburg experienced in 2003. Dalton credits Charleston’s tourism-related economy. “It’s not as manufacturing-based like Greenville-Spartanburg, who have a lot of lay-offs over the last two years; Raleigh and Charlotte have also had a slowing of job growth,” he says.

The Beach Co.’s Nelson believes the conversion of large apartment complexes to condominiums has helped to restore the apartment industry. “Developers have converted apartments into condos, where people had to buy their unit. Some of the people opted not to purchase, either they couldn’t afford to buy or they just wanted to rent, and they had to move and find other sources—which filled a lot of rental vacancies.”

Nationwide, historically low interest rates have made it much cheaper to pay a monthly mortgage payment on a condominium than to rent an apartment, says Dalton. “That takes away potential renters, but unlike the rest of the country, it has not been affecting Charleston as much,” he adds.

The reason for that, according to White, might be because of the College of Charleston. Daniel Ravenel Real Estate’s property management office said they have increased their number of rental properties in 2003 by over 25%. “There has been no lack of demand to rent those properties,” she says. “We still have lower priced condos that sell very well in our market. While we have some rental property for young professionals, in general, the apartment rental market is greatly influenced by college rentals.”

White speculates that the huge range in sale prices of multi-family units, from $75,000 up to $2.85 million, shows that Charleston has the edge on this particular market. “People are coming who want high-end residences and part-time residences—which is why the condominium market is so good for them. They are at two ends of the spectrum, with reasonably priced college rentals versus luxury ones.”

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