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WilmingtonBiz Magazine

Apartment Complexity: Hundreds Of Units Are In The Pipeline, But Why Is There So Much Demand?

By Jenny Callison, posted Apr 10, 2023
Poolside at 17 Social apartments in midtown Wilmington
It’s a familiar pattern: Following the announcement of any new apartment development, area residents scratch their heads and ask why more apartments are rising. There are complaints about the prospect of more noise and snarled traffic.
 
But the demand for apartment living seems to be ceaseless as the region’s population continues to grow.
 
In early March, plans were unveiled for a 72-unit complex on Carolina Beach Road in Wilmington, and more than 500 multifamily units are planned along Blue Clay Road in northern New Hanover County. New apartments are rising in the Leland area, as well as farther south in Brunswick County, and crews are working on apartment buildings in Pender County’s Hampstead community and beyond. 
 
“There has been a lot (of apartment construction) in the last 10 to 11 years,” said Bill Schoettelkotte, head of multifamily development for Wilmington-based Cape Fear Commercial. 
 
“Before that, there was very little new apartment development since The Reserve at Mayfaire in 2005. The recession hit, and nothing was being built. In late 2011, we started The Headwaters at Autumn Hall: There was a boom with low interest rates and, at the time, low construction costs. We and other developers kept building, rents kept increasing and – in the last three to four years – construction costs went through the roof.”
 
Schoettelkotte noted that, even with relatively higher interest rates and construction costs, the building boom, and in-migration, continue.
 
“The pandemic brought people who could work from anywhere,” he said. “If you worked for a company in New York and were living up there, all of a sudden you could work from here and get a ‘pay raise’ because of the lower cost of living. The pandemic, combined with cheap money, accelerated (migration to Wilmington.)”
 
Porter Jones, of DPJ Residential, who was involved in the development of multiple apartment communities in Wilmington, including 17 Social on South 17th Street, continues to look for potential apartment projects in Wilmington. 
 
In a 2021 Greater Wilmington Business Journal article, Jones said, “If Wilmington continues to be an attractive place for people to move to, I believe demand for apartments, both urban and suburban, will continue to be strong.”
 
A 2022 study published by RentCafe, a nationwide apartment search website, quantified demand for apartments in various North Carolina metros. Wilmington was fourth highest, with 12 renters competing for each vacant apartment in the area. Asheville ranked first, followed by Fayetteville and Greenville.
 
Some people who want to live in a single-family home have ended up as apartment dwellers, as increasing demand from newcomers for single-family homes slammed into the reality of labor and materials shortages. Some prospective homebuyers have been priced out of the market as home prices and mortgage interest rates have risen. Renting an apartment becomes a short- or even long-term solution.
 
“We’ve seen a lot of that. People are building a house and need a place to live. Or they’re not sure where they want to be. Or they can’t find a house in their price range. They rent in the meantime,” Schoettelkotte said.
 
Brunswick County’s planning director agrees and points to a demographic group that might seek out a multifamily development.
 
“People are relocating here by the masses, and a lot of them are seniors,” said Kirstie Dixon. “They need somewhere to go, at least in the short term. Multifamily housing has more services and no yard to maintain. The majority of (these developments) have amenities.”
 
There’s a segment of the market looking for just that type of living: amenity-rich, with few maintenance tasks. These are people who are ready to downsize and give up the responsibilities of home and yard maintenance, said McKay Siegel, partner with East West Partners. This demographic may rent an apartment or purchase a condominium.
 
“Condo residents are often older, single people,” he said. “They make friends with their neighbors and have a de facto social club.”
 
East West Partners, which has partnered with the city of Wilmington to build apartments, condos and commercial space downtown, is building a 346-unit apartment complex on a former golf driving range along Oleander Drive. The development, dubbed The Range, will be a mixed-use complex with 13,000 square feet of retail and restaurant space. 
 
“We don’t create the market for multifamily,” Siegel said. “We’re not going to build if there’s no market. Nationally, the homeownership rate is 65%; in Wilmington, it’s 45%.”
 
A few years ago, multifamily developments in Brunswick County were the exception, but they are on the rise now. While residential development in Leland continues to be primarily single-family detached homes, the town is seeing more growth in townhomes and duplexes, and several large apartment complexes have joined the housing mix, said Benjamin Andrea, Leland’s director of planning and inspections.
 
Andrea said that while apartment development slowed during 2021 and 2022, Leland has several projects in the approval process totaling just under 1,400 units. 
 
Brunswick County’s Dixon ticks off several other apartment projects going in along Southport-Supply Road and in the N.C. 211 corridor. She cautions that “multifamily” should not be confused with “affordable.”
 
“The majority of these new multifamily developments have amenities; a lot of them are amenity based, which makes them not quite as affordable,” she said. “There are a lot of luxury apartments. It’s probably no longer true that home prices and rent costs are lower in Leland than in Wilmington.”
 
This reality means that many firefighters, police officers, preschool teachers, health care workers and hospitality industry employees, among others, will still find it difficult to find housing near where they work in New Hanover County. Nick Pylypiw, chief data officer for Cape Fear Collective, said his organization’s definition of affordable is housing costs that total no more than 30% of a household’s income.
 
“An income of $42,000 is required for a household to afford a (typical) two-bedroom apartment in New Hanover County,” he added.
 
But there’s another way of looking at new apartment stock, even if it’s not affordable by many segments of service industry workers, Pylypiw added. Those new renters won’t be taking older, less-expensive housing stock away from people who have few other options.
 
“They won’t be knocking down a house on the Southside, taking that house that’s affordable to somebody,” he said. “In the Greenfield Lake area, developers are paying cash, and sometimes the owners don’t know what their house is worth. Then those places are being knocked down.”
 
The replacement homes are often more expensive than the previous owners can afford, meaning that the former owners must move farther away from their communities and workplaces to find affordable housing.
 
The city of Wilmington offers incentives in the form of density waivers and occasionally zoning adjustments to multifamily developers who earmark a percentage of their units for lower-income tenants. Such is the case at The Range. East West Partners will set aside 10% of its apartments as affordable housing, Siegel said.
 
“I can put 350 people on 15 acres near where they want to be, versus on 120 acres farther away,” Siegel said. “What is best for traffic?”
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