Organic Job Growth Drives the State Capital
Columbia’s recovery continues in 2012 as job growth exceeds the national average. Healthcare and education offer solidity across business cycles and continue to expand throughout the Columbia MSA. As a result, the unemployment rate is 7.8% at the end of the 2nd quarter 2012. The efficient business costs in Columbia attracted Michelin Tire to invest a $750 million expansion project that will create 500 new jobs. Also, SCANA Corp. plans to build the first new nuclear power plant in South Carolina that will bring between 600 to 800 permanent jobs. Lastly, Amazon.com is increasing its workforce by 2,000 workers in their new facility this upcoming year.
There are roughly 33,348 apartment units in Columbia’s market with a 91.7% occupancy rate with rental rates averaging $764 per month. The Central submarket has the strongest occupancy rate in the market, currently 96.4% as of 2Q 2012, and rental rates that average $1,083 per month. The rental rate here has experienced a 3% increase since October 2011, which further explains the organic rent growth and stability of the Central submarket. Owners are realizing continued concession burn-off and a stronger tenant profile which diminishes collection loss, driving further effective rent growth. The Arnold Companies 51-unit development recently delivered and is in leaseup, but no other projects are currently under construction and few units are being proposed in the Central submarket. Other submarkets seeing increased development activity are the Northwest and Northeast recognizing a contingency of 531 units (Ballentine Crossing – 315 units & Marina Bay – 216 units) and 216 units (Arcadia Park – 60 units & Sage Pointe Phase II – 156 units) respectively.
Columbia continues to experience an increase in sales activity in 2012 because of improving rents and occupancies as well as the availability of attractive financing for apartment acquisitions. The compressed cap rate environment make it an appetizing time to sell in coordination with the following: historically low treasuries, a dwindling home-ownership rate, eighty one million generation Y’s in their prime renting years, and a lack of new deliveries. Additionally, the University of South Carolina’s growing student contingency is attractive to investors seeking persistent demand and a stable return.
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