Colliers Report: Investment sales on target for a record year

Research & Forecast Report
Q2-2018 CHARLESTON | INVESTMENT

Investment Recap

According to Real Capital Analytics, Charleston area investment sales (over $3 million) for the mid-year 2018 totaled approximately $545 million, on pace for an annualized $1.09 billion, which would eclipse 2017’s record of $1.06 billion.

Multifamily

Continuing to lead the pack in volume is multifamily (apartment) sales at $230.5 million, or approximately 42% of the total sales volume. There have been 14 communities sold through mid-year 2018, totaling 1,924 units, including seven complexes under 125 units. Sales prices ranged from $63,000 per unit to $193,000 per unit; the overall average price per unit averaged $120,000. The largest multifamily transaction was The Heyward  at just over $48 million or $185,000 per unit; it is a new 260-unit community off Savannah Highway in West Ashley, purchased by Carter Haston out of Nashville.

Office

Through mid-year 2018, office building sales commanded the third most investment dollars at $87.6 million – 16% of the total sales volume. Nine buildings traded, totaling approximately 375,000 square feet. Office building prices averaged $234 per square foot, ranging from $98 per square foot up to as much as $411 per square foot for unique properties on both ends of the spectrum. Traditional office buildings prices ranged from $190 per square foot to $290 per square foot. The largest transaction so far in 2018 was the Hall Emery purchase of the new Faber Plaza at 4400 Leeds Avenue in North Charleston for $36.4 million or $289 per square foot. The second biggest transaction was the purchase of Ashley Center by Rivers Enterprises for $16.9 million or $217 per square foot. In 2012, REVA Companies originally bought the property for $7.5 million and subsequently renovated and re-tenanted it.

Retail

Shopping center/retail sales (including single tenant assets) totaled $43.8 million, only 8% of the total sales; volume is down substantially from years past – shopping center/retail sales were around $192 million at mid-year 2017. There was one single-tenant asset sale: the CVS in St. George sold for $3.66 million. In addition, one traditional grocery-anchored retail center was purchased at West Ashley Place for an allocated sale price of $15.4 million or $258 per square foot. This sale was part of the H&R REIT portfolio sale to Apollo. Two centers located on the Peninsula were sold for over $20 million each; however, they will be redeveloped and are not included in the totals since they are technically land sales. The former Kmart on Ladson Road traded for $4.0 million or $48 per square foot. An Atlanta investor, Penn Hodge, purchased the property and plans to convert the box to a Stars and Strikes family entertainment center with a bowling alley. The remaining transactions were five multi-tenant shopping centers that traded for an aggregate sale price of $20.7 million or $219 per square foot. This group of sales was led by the Shoppes at Centre Pointe II, which sold for $8.65 million or $195 per square foot.

Hotel

Hotel sales totaled $84.6 million or 16% of the total sales. The average price per key was approximately $110,000 and included three separate transactions of sales totaling approximately $16 million each: the Fairfield Inn at the airport, the Residence Inn in North Charleston, and the Home2Suites in Summerville. All sold for between $160,000 to $176,000 per key.

Industrial

Warehouse sales were second in total sales volume at an astounding $98.5 million (versus $71 million for all of 2017); 18% of the aggregate sale total and an average price of $59 per square foot. The largest transaction was Stockbridge Capital’s purchase of Sun Capital’s North Pointe Business Campus for $30.5 million or $87 per square foot. Two additional warehouses sold for over $20 million each: EBD Management’s purchase of 4444 Piggly Wiggly Drivewarehouses which sold for $50 per square foot, and an owner/user’s purchase of 1116 Newton Way at $57 per square foot.

Capital Investment & Employment

During the first half of 2018, $322 million of new capital investments have been made. According to the Department of Numbers, Charleston job growth increased by 7,400 jobs, rising total employment to a record high of 361,700 or a 2.0% increase over the past 12 months. In the month of June 2018 alone, the Charleston metro area added approximately 4,000 jobs. The most significant growth over the past 12 months has been in the following sectors: Information (+8.3%), Construction (+7.3% from July to June), Education and Health Services (+5.3%) and Manufacturing (+4.1%). The only two sectors that showed losses in jobs over the past year were Professional and Business Services (-0.7%) and Leisure/Hospitality (-3.4%).

Market Forecast

The Charleston market will continue to garner more than its fair share of investor demand, especially for in-fill locations and growth corridors like Summerville. Landlords will look to backfill a few boxes from recent Bi-Lo store closings. Investment sales are expected to exceed $1 billion in annual volume again in 2018, with a strong push anticipated in the fourth quarter as Charleston continues to create significant jobs, population growth continues and the number of households increases.