A strengthening real estate market is aiding Greenville’s development picture, but underlying geographic and demographic changes are adding interesting variables to the equation, according to local experts and analysts.
“We have been on an aggressive mode of expansion in terms of where we can grow outside of Charleston,” Dan Doyle, vice president of development at the Charleston-based Beach Company, said during a recent CREW Upstate real estate panel discussion in Greenville.
“We want to target markets that have an in-migration of population so we have people that are moving to the area versus moving from,” he said. “A lot of that is fueled by job growth, which is prevalent throughout the Southeast right now.”
The region, he said, “is just a real focus for a place where people want to live, where they want to move their families to, where jobs want to relocate to.”
And Greenville falls in the middle of that map, Doyle said.
There is a key second component, he said. “When you look at the infrastructure that’s in place, to set up a great place to live and to work, Greenville checks that box – and then some. There are very few locations, in my opinion, that can compete with the setting that you all have here in town.”
Main Street typically has been Greenville’s downtown development focus, but that focus is moving to other areas, “which is a very positive sign,” Doyle said.
“This is a location that had a need,” Doyle said of Greenville. “Particularly from a multifamily standpoint in the downtown location, there were very few apartments built up until recently. When you marry that up with the changes that are going on with demographics, where people are choosing to live, how a millennial population chooses to live, how they’re delaying the decision to buy a house until later in life, it sets the tone and it sets the stage for what you’re seeing today.”
Tommy Molin, senior associate with CBRE and another panel member, said multifamily projects with commercial components are “100 percent the new norm” for developers.
“In particular in the Southeast, but across the country, urban apartment projects all are basically required or the cities all want them to have commercial space,” he said. “The trend’s certainly going to continue.”
Another dynamic is at play, according to real estate experts.
Investment activity in Greenville is escalating as more institutional investors enter the market looking for steady and secure cash flow investments, due partly to the shift of investors from saturated and competitive primary markets to secondary and tertiary markets, according to Colliers International researchers.
High occupancy and asking rental rates are in turn creating a lower-risk environment with opportunity for higher returns for local and out-of-market investors, the researchers said.
“It takes a while for those institutions to get comfortable with a location,” Doyle said. “You are now seeing those institutional players come into this market and they now believe in Greenville. They now know Greenville. That will help fuel more investment into this area.”
Doyle’s firm is behind the Main + Stone and South Ridge projects in Greenville.
South Ridge, a mixed-use residential and retail development at South Church Street and University Ridge, has 350 apartment units.
In choosing the South Ridge location, Beach Company officials noted the development was “situated between the highly desirable Augusta Road neighborhood and the unique urban parks of downtown Greenville.”
South Ridge has one-, two- and three-bedroom units in the proximity of Cleveland Park, the Greenville Health System Swamp Rabbit Trail and Falls Park.
The project also includes retail and commercial space, as well as a parking garage at the center of the property.
Main + Stone is a 292-unit mixed-use development under construction in Greenville’s downtown submarket.
In addition to apartment homes, it will add 20,800 square feet of retail and commercial space in the North Main area.
Doyle said several years ago his company began introducing smaller floor plans in its new multifamily developments. Company officials thought renters would be willing to trade square footage for a lower price.
“That enabled us to get a unit into the marketplace that, if I wanted to live by myself and I didn’t want to have a roommate, I could afford,” Doyle said.
Partners and lenders questioned the strategy, but it proved successful in Charleston, Doyle said. It’s also proving successful in Greenville.
Studio apartments “are the first ones to lease,” he said.
“The sweet spot is around $1,000,” said Donna Brashier, a portfolio manager at Beach and another panelist.
“If you can get that price point to $1,000 or $1,100, they fly off the shelf.”
In the Upstate, construction deliveries and net absorption are up since 2011 while vacancy rates have declined for office, industrial, flex and retail space, J. Terrence Farris, a Clemson University associate professor, said at the real estate forum.
“Things are looking pretty good,” said Farris, who focuses on urban renewal history and futures research.
Developers are building about 1 million square feet of retail space in the Upstate each year, he said.
“As I like to tell our students, that’s like one regional mall a year,” Farris said.
Since 2001, 6 percent of single-family and 70 percent of multifamily permits in Greenville County have been in the city of Greenville, Farris said.
“Single family is still going to be built at the edge [of Greenville],” he said. “There are going to be infill opportunities in the city. But this is something that’s going to affect retail and office and locations of all kinds of different uses.”
In discussing whether commercial real estate demand is sustainable, Wells Fargo economic analysts said last month operating fundamentals are still positive.
Based on data from CoStar, the retail vacancy rate reached an all-time low in the second quarter, and asking-rent growth continues to advance at a healthy pace, said senior economist Anika R. Khan and analysts Azhar Iqbal and May Tysinger.
Mall asking-rent growth notched a double-digit gain in Q2, and neighborhood center activity is also improving. Much of the surprising sector resilience can be traced to landlords shifting the tenant mix from traditional anchors to “experiential” anchors, like restaurants, the analysts said.
