SOUTHEAST SNAPSHOT, NOVEMBER 2005

Savannah Multifamily Market

Jim Sewell President Coastal Apartment Advisors

The Hilton Head/Bluffton market struggled due to over development in the early 2000s, but recent condominium conversions have pushed rental market conditions to all-time highs in occupancy and rental rates. In the past 2 years, 1,134 units have been converted or are currently converting to condominiums, and an additional 728 units are slated for conversion within the next 12 months. In 2003, conversions represented approximately 36 percent of the 3,106 units in Hilton Head/Bluffton. With only 1,972 units remaining in the area, the additional conversions will move the rate closer to 60 percent. However, as stated before, a high number of converted units are being sold to investors, which is creating a “phantom rental pool.” So, the loss to the rental pool is not as significant as the numbers show.

Brighton Bay, Preserve at Indigo Run, Old South and The Legends were among the first conversions in Hilton Head/Bluffton while more recent conversions include Pine Court, Colonial at Ashley River Plantation and Westbury Park. Retail pricing for conversion sales range from $180 per square foot to more than $200 per square foot on Hilton Head Island and from $115 per square foot to more than $230 per square foot in Bluffton.

Recently, though, single-family development has dominated the Hilton Head/Bluffton landscape as current land costs and historically poor market conditions have allowed much of the available zoned land to be purchased by residential developers rather than apartment developers. The majority of development in the Hilton Head area is taking place in Bluffton and Hardeeville due to land availability, and both towns have attracted several large residential developments as well as Okatie Crossing, a 1 million-square-foot lifestyle center with Dillard's as a potential anchor, that sits on the Beaufort and Jasper county line.

This trend has put a strain on new multifamily projects in Hilton Head/Bluffton, which will most likely be built as condominium quality units with a conversion option as an exit strategy. Recent developments include a portion of the Old Carolina Golf Course being redeveloped that will result in 200 new multifamily units being delivered to the market. The 156-unit multifamily Phase II of the Lakes at Myrtle Park is also under construction. All other proposed multifamily developments in the Hilton Head/ Bluffton market will most likely end up as high density residential.

The Jasper Port Project is inevitable and will affect the growth patterns of the Hilton Head/Bluffton market. Jasper County is at the helm to build a deepwater international shipping port on the South Carolina side of the Savannah River, which will promise an economic boom to Jasper County's residents and resonate through the entire Lowcountry.    

In Savannah, the rental market felt its largest effect when the military personnel were called for active duty last year. Since then, however, the market has seen a recent recovery as occupancies have risen to more than 90 percent and Class A properties continue to be developed with luxury amenities. While several condominium conversions are ongoing including The Commons, Hoover Creek Plantation, Drayton Towers and Archer Way Townhomes, as mentioned before, conversions only represent approximately 5 percent of Savannah's market.

The Pooler area continues to see the most multifamily activity with two new projects totaling 493 units. At Berwick Plantation, on the south side of Savannah, 276 multifamily units are under construction; and Savannah's downtown is witnessing 144 multifamily units being built. The port facilities have seen continuous growth and tourism should push the economy toward a positive trend in the future.  

Many exciting outside influences have positively affected Savannah's economy. International Papers has plans for a 4,045-acre New Hampstead development that will spur new multifamily growth in the southwest Chatham area. Two new large import warehouses have been announced for the Savannah Port: Target's 2 million-square-foot import warehouse and IKEA's 1 million-square-foot import warehouse. The Home Depot and Wal-Mart already have existing import warehouses in the area. Also, the Pooler area will be affected by the airport's announcement of four new gates as well as double-digit growth for the airport last year.

Due to Savannah and Hilton Head's economic and multifamily growth, new developers have entered the two markets. Birmingham, Alabama-based Crowne Partners, Atlanta-based Focus Group, Charleston, South Carolina-based The Beach Company, and Auburn, Alabama-based Charter Companies are all new to Hilton Head and Savannah.  

— Jim Sewell is president of Coastal Apartment Advisors.


©2005 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.