Within the first 48 hours of beginning marketing efforts on a Wilmington apartment property last year, a local commercial real estate company received seven offers from potential buyers.

All but one of those interested in purchasing Oak Court Apartments on South Kerr Avenue were from outside the region, brokers said. In December, the 2.83-acre property was purchased by Ivy Investment III of Waxhaw for $4.2 million from the local investors.

The purchase was one example of what brokers say is an ongoing interest in apartment activity in the Cape Fear Region, including sales of existing properties, new units under construction and more apartment projects in planning phases.

“It was a highly competitive bid process, which supports the fact that investors are chasing returns to tertiary markets that have a compelling story,” said Paul Loukas, a broker with Wilmington-based Cape Fear Commercial, who along with CFC founder Brian Eckel represented the seller of Oak Court Apartments.

Explaining what he means by “story,” Loukas said, “The story behind Wilmington is just simply: While a lot of people have heard of it, a lot of people haven’t. But with the forecasted growth, the talking points that we have with these investors include the facts that our area is a … regional hub for retail and medical, supported by a very strong community college as well as the University of North Carolina Wilmington.” 

Last year, different buyers paid more than $136 million for seven separate apartment communities with a total of 1,731 units in New Hanover and Brunswick counties, according to the latest apartment market update from Multifamily Realty Advisors. 

The figures in the report, released in February, represent a significant decrease compared to 2014, when 10 apartment communities were purchased for more than $235 million. But 2014 was considered an unusual year, apartment experts say, and nine of the apartment communities sold during that year were part of two separate, larger portfolio sales.

Supply and demand

Thousands of new apartments are on the way. From 2009 to 2012, new apartment development in Wilmington nearly came to a complete standstill, the report said, with only two new apartment communities completed during the four-year period.

But despite the recent and ongoing increase in supply, the demand seems to have remained strong, said Richard Cotton, a broker and managing director of Multifamily Realty Advisors.

“The market has done remarkably well in absorbing these new units without having a negative impact,” Cotton said recently.

New apartments come with higher rents. The average apartment rental rate for the entire market, according to the Multifamily Realty Advisors report, is $907 per month while newer apartments – in the 1- to 5-year age group – have the highest average rate at $1,333 per month.

Cotton said there are currently a little over 950 vacant units in the Wilmington market, which includes Brunswick County. 

“I don’t see the Wilmington market as becoming overbuilt any time in the near future,” Cotton said. 

At least one apartment developer is concerned about the relationship between rental demand and job growth in the area.

“In our opinion, Wilmington runs a high risk (higher than Raleigh and Charlotte) of overbuilding, especially for rental housing,” said Porter Jones, owner of DPJ Residential, in a recent email. “Demand for apartments can be directly tied to job growth. The rule of thumb is that for every 3 new jobs being added to the local economy, this should result in demand for 1 new apartment unit … When you look at Wilmington’s economy, it has experienced very little, if any job growth over the last year or two. Yet, Wilmington has 11 apartment communities under construction ... and an additional 9 apartment communities planned …”

Jones said that if all of the more than 3,400 units that are either under construction or in planning stages get completed in the next two or three years, he’d like to see at least 10,000 new jobs created.

“If Wilmington’s economy does not start creating new jobs, it does run a risk of overbuilding,” Jones wrote. 

Unique concepts

Some of the apartments Cotton said he’s been excited to see new kinds of apartment products on their way to Wilmington in the form of riverfront communities.

“You can go to other markets like Charleston and see really upscale apartment properties [on the waterfront], but Sawmill Point, which is under construction, and Pier 33 really represent a new market,” Cotton said of the two projects along the northern Cape Fear River.

Sawmill Point will have 278 units, and Pier 33 is expected to include
300 units.

Pier 33 is under development by DeWitt Carolinas, while Sawmill Point, a Symphony Properties project, is under construction by McKinley Building Corp. 

Ken Dull, president and owner of McKinley Building, said Sawmill units are expected to be complete before the end of the year.

“My personal opinion is that the multifamily momentum will carry us at the very minimum through this time next year and probably past that,” Dull said. “Any projects that are already as far along as ours … should expect a healthy lease-up.”

But there is a limit, Dull said.

“As someone said to me one time,” he said, “and I always remember this, ‘Apartments are the thing to do until they’re not.’”

Some of the apartment projects in the works in the Wilmington area

UNDER CONSTRUCTION

Beau Rivage Apartments: 120 units, Beau Rivage Drive 

Belle Meade Apartments: 228 units, Carolina Beach Road

Cambridge Village Phase II (senior): 130 units, Eastwood Road

Echo Farms Apartments: 184 units, Carolina Beach Road

Flats at Mayfaire: 121 units, 1817 Sir Tyler Drive

Grand View: 110 units, near Canal Street before Wrightsville Beach bridge

Meridian at Fairfield Park: 241 units, Carolina Beach Road

Sawmill Point Apartments: 278 units, northern Cape Fear riverfront downtown

South Front Phase II: 53 apartments and retail, Third Street
 

PROPOSED

City Block Apartments Phase II: up to 100 units, downtown Wilmington

Element Apartments at Barclay: 258 units, Independence Boulevard and 17th Street 

Harrington Village: 300 units, 214 Village Road, Leland

Hawthorne at Leland: 240 units, Ploof Road and U.S. 17, near Leland

Pier 33 Apartments: 300 units, northern Cape Fear riverfront downtown

Shipyard Village Apartments: 96 units, 2821 Carolina Beach Road
 

Sources: Multifamily Realty Advisors, developers