Like many coastal markets across the nation, Charleston is booming from an influx of condominium converters, while South Carolina’s other big markets, Columbia and Greenville-Spartanburg, are still trying to emerge from too much new construction.

“When other markets across the U.S. started to see an upswing, Greenville and Columbia were at the slower end,” noted Jennifer Traynor, a multifamily analyst with Carolina Real Data, a Charlotte, N.C.-based research firm. “The most interesting thing in South Carolina is the condo conversion in Charleston.”

During the six-month period between February and August 2005, 826 apartment units in Charleston were converted to condos, according to Carolina Real Data. In fact, there were more units taken from the market than added, with most of the condo conversion occurring in Charleston’s upscale suburb of Mt. Pleasant where land is expensive and a moratorium on development was in place for several years.

“Florida condo converters have chewed their way up the coast to Charleston,” said Blake Okland, an investment sales broker with Apartment Realty Advisors’ Mid-Atlantic office. He added that 75% of the properties that he’s sold in Charleston are slated for condo conversions.

For example, New York-based Tarragon Corp. purchased the 240-unit Southampton Court for $30.8 million in May 2005 and converted the six-year-old complex into condominiums that sell for $150,000 to $300,000.

In 2005, roughly $208 million of apartment assets have traded hands in Charleston, according to Real Capital Analytics, Inc. The volume of deals represents a 55% increase over the $134.4 million sold during 2004. Moreover, the average price per unit increased 14.2% to $83,071 from $72,710, according to the firm.

Apartment investors are competing with condo converters and often find that they can’t pay the prices. GMAC Commercial Mortgage Corp., for example, recently financed a property in the Mt. Pleasant submarket that sold for $174,000 per unit on a 4.5% cap rate, according to Vice President Steve Brady.

The volume of condo conversions, coupled with the high cost of single-family homes and high barriers to entry for new development, has pushed Charleston’s apartment vacancy into the low single-digits. Carolina Real Data’s most recent market report shows that Charleston’s vacancy rate was 5.9% in August 2005, the lowest it’s been in five years and significantly better than the 8.2% vacancy for the same period in 2004.

Because of the condo conversions in Mt. Pleasant, the remaining apartment properties are performing quite well, according to Scott Wilkerson, president and CEO of BNP Residential Properties, Inc. The Charlotte-based real estate investment trust’s (REIT) 232-unit Paces Watch Apartments in Mt. Pleasant is about 95% occupied, and the company’s other property in North Charleston, the 240-unit Waverly Place, is about 92% occupied.

“Charleston is tremendous right now because supply is being reduced as many apartments are going condo,” said Tom Grimes, senior vice president and director of property management operations for Mid-America Apartment Communities, Inc. “To us, Charleston is a pretty positive story, a place where we’re committing some capital.”

The REIT recently completed updates to the 208-unit Runaway Bay, a Class A property in Mt. Pleasant. Grimes said the complex is 99% occupied and has achieved rental growth of 5% over the past few months.

Carolina Real Data shows that rental rates have increased 2.2% over the past six months to an average rate of $713. Only 13% of properties in the coastal city and its suburbs are offering concessions.

New construction concerns

Concessions in Columbia, however, are still available. “Columbia is not a Charleston in terms of how dramatically it will snap back,” Okland pointed out, adding that apartment properties are still offering as much as six weeks free rent.

Nonetheless, occupancy improved and rental rates increased during 2005. As of October 2005, Columbia’s vacancy rate was 8.1% compared to 9.8% in October 2004, according to Carolina Real Data. Rental rates increased an average of 2% to $647 per month.

Continued improvement depends on how many new apartments come to market in 2006. “We’re not seeing anything in the Columbia market that concerns us other than the new construction,” said Doug MacFarland, head of multifamily operators for Harbor Group International, LLC.

Harbor continues to look for investment opportunities in South Carolina’s capital city, MacFarland added. The Norfolk, Va.-based company currently owns two properties totaling 800 units in Columbia. Both properties, including Pace’s Brook on the northwest side of town, have occupancies in the mid-90% range.

Mid-America’s two properties in Columbia also are doing fine, Grimes said, but that doesn’t mean he’s not worried about new supply. “Columbia has had a supply issue because there are no barriers to entry,” he explained. “It seems that they have a little more than is healthy for that market.”

Traynor noted that the number of proposed units for the next six months has increased from 610 units to more than 2,500 units – a 10% increase in supply for the entire market and the most the market has seen in several years.

Columbia is not alone when it comes to over-supply. Greenville-Spartanburg had almost 1,100 units under construction in mid-2005 and another 500 planned for the first part of 2006 despite poor demand. “Greenville-Spartanburg has been a very poorly performing market, and nothing has changed,” BNP Residential’s Wilkerson lamented.

The REIT has several properties in upstate South Carolina, which has suffered the loss of textile and other manufacturing-related jobs. Even BMW Manufacturing Corp.’s push to add 5,000 new jobs over the next five years hasn’t had a huge impact on the market, which had a vacancy rate of 12.6% in May 2005, according to Carolina Real Data. However, the research firm’s preliminary numbers for its upcoming market report show that the vacancy rate is down to about 10%, Traynor said.

“Greenville-Spartanburg is very well located and has a pro-business attitude,” Wilkerson contended. “The potential is there, and in time it will do very well. But it’s just been hammered.”

South Carolina market stats


Average rent

Market direction

Charleston (Aug. 2005)




Columbia (Oct. 2005)




(May 2005)




Source: Carolina Real Data