A decade ago I would drive around our suburbs and say to myself, “Who are all these people buying $350,000 homes?”
Now I drive around our city saying, “Who are all these people renting $2,000-a-month apartments?”
In case you haven’t noticed, multifamily housing in metro Augusta has gone upscale in a big way. And it’s booming.
Consider what has opened in just the past year:
• The 280-unit Residence at Riverwatch (one bedrooms starting at $1,010 a month) off River Watch Parkway – just a stone’s throw from the future Topgolf complex
• The Ironwood (two bedroom carriage units at $1,800 a month) in North Augusta’s Riverside Village
• The Clubhouse (two-bedroom corner units for $2,700), a 32-unit tower overlooking SRP Park
• McHenry Square (a 535-square-foot studio unit for $955), 229-units off Jimmie Dyess Parkway
The list doesn’t include what’s in the pipeline, including the soon-to-open Beacon Station, the city-backed 221-unit upscale complex at the corner of Wrightsboro Road and R.A. Dent Boulevard, or the proposed 133-unit apartment community Ivey Development plans to build at 11th and Fenwick streets.
Also not included are the 140-plus apartments planned for the $94 million mixed-use Riverfront at the Depot project at the corner of Sixth and Reynolds streets.
And don’t forget about the 250 apartments that the owners of King Mill will (someday) develop along the Augusta Canal, or the 90-unit apartment tower Azalea Investments wants to build at the former Augusta Police Department property at Ninth and Reynolds streets.
Based on current market rates, expect rents at those developments to start in the $1,000-a-month range, as well as come with all the bells and whistles (granite countertops, stainless steel appliances, “engineered-wood” floors, etc.) that discerning apartment-dwellers expect these days.
Any way you slice it, that’s a lot of spendy apartments. Just what in the heck is going on here?
As real estate advisor Polk & Associates would say, “With empty-nesters looking to downsize, millennials staying single longer, and a general desire for a more convenient and social lifestyle, more and more ‘renter-by-choice’ Americans are forgoing mortgages for lease agreements.”
In other words, more young professionals want to live close to where they work and play. And in the Augusta metro area, some of the best work and play happens in the urban core.
You know the times are a changin’ when a major builder such as Ivey Development – which has built its business on developing suburban subdivisions – is planning to sink money into the old Augusta Iron & Steel property, a site that just a decade ago was in the no man’s land between the central business and medical districts.
Downtown apartments aren’t a “new” thing – lofts have been a hot commodity in Augusta for more than 25 years – but the massive influx of new, large-scale investment is a fairly recent phenomenon.
Some may disagree, but I consider two developments to be pivotal kick-starters in the city’s high-end multifamily renaissance: Enterprise Mill and the Canalside apartments.
The adaptive reuse of the 19th century textile mill into offices and 60 apartments more than 20 years ago by Augusta businessman Clay Boardman was a “proof of concept” that locals would pay mortgage-sized rents to live in a unique environment.
The 2015 opening of the nearby 106-unit Canalside development by a North Carolina developer at the corner of Walton Way and the St. Sebastian overpass proved the city was “ready” for outside investment.
And boy, we’ve seen a lot of outside investment in multifamily properties lately. Just this month the 300-unit, “Class A” Grand Oaks at Crane Creek apartment community in west Augusta was purchased from Augusta-based Southeastern Development by a California firm for $58 million.
The Ironwood apartments in North Augusta, built just a year ago by a Birmingham, Ala.-based developer, also was purchased this month for a yet-to-be-disclosed price by a private equity firm out of Greenville, S.C. (there is no doubt it’s an eight-figure sum).
There’s been a run on multi-family developments in the metro area for years now, with the Atlanta office of Cushman & Wakefield brokering many of the top deals, including Evans’ 358-unit Ansley at Town Center and west Augusta’s 240-unit The Estates at Perimeter for a whopping $149,000 and $129,000 per unit, respectively.
Many of Augusta’s apartment units, about 70 percent, were built before 1990. And most of those units – about a third – were built between 1980 and 1989, when the Savannah River Site was undergoing a massive Cold War buildup under then-operator Westinghouse. Nearly all of those apartment properties have aged out of Class A status.
Let me put it this way, when I moved to Augusta 22 years ago, the complex where I rented a two-bedroom apartment for $650 a month was considered nice with a capital “N.” When I drive by the property these days, I think the place is bordering on “OK.”
But even older area properties are getting snapped up, including the 120-unit Terraces at Summerville complex on Hickman Road and The Enclave at Augusta, a 276-unit development in the National Hills neighborhood. Those developments, which are both nearly 50 years old, went for $50,000 and $57,000 per unit, respectively. The 120-unit Willow Ridge complex in west Augusta, which is exactly 50 years old, sold for $52,000 a unit.
I could fill the remainder of this column with more multifamily development acquisitions, but I think you get the point.
These equity firms aren’t investing in real estate so much as they are buying cash flow. And apartments generate a lot of steady cash from people who don’t want a home, aren’t ready for a home or can’t qualify for a home. (Augusta’s home ownership rate is about 66 percent, according to estimates from the U.S. Department of Housing and Urban Development.)
In 2018, Augusta’s average apartment rent was $826 a month, a 3.5 percent increase from the previous year. Factor in the metro area’s historic 90 percent occupancy rate – even higher at high-end apartments – and you see what all the fuss is about.
Yes, absorption rates are high for new apartments – most Class A properties are nearly fully leased by the time the paint is dry. But what will future demand look like?
Although Fort Gordon’s population is forecast to grow by at least 6,000 during the next five years, about 80 percent of the 5,000 jobs tied to the relocation of Army Cyber Command have already moved here.
Keep in mind that completion of the new reactors at Plant Vogtle in three to four years will result in about 6,000 construction workers moving out for their next long-term project.
And at some point in the next decade, I suspect some of these millennials will eventually do what their parents did –settle down, get married and buy homes in quiet neighborhoods with good schools and big supermarkets.
I have to admit, I felt a little validated when I heard Jay Forrester, the regional president of South State Bank, express concern about a multifamily “bubble” during a forum last month with the Federal Reserve Bank of Atlanta. I thought I was the only one thinking we might be overbuilding a tad.
But then again, what do I know? I was done with apartment living 20 years ago. None of my friends live in apartments, nor do either of my children (so far). So I’m not exactly hip to the trends.
And I suppose that’s the point: These $2,000-a-month upscale apartments aren’t being built for me. They’re being built for people who will be like me in 20 years.
Maybe 25 years.
Reach Damon Cline at (706) 823-3352 or [email protected]