Myrtle Beach:

Economic Fluctuations Aren't Dimming Area's Outlook

By Jim Parsons

With one gloomy economic forecast after another calling for higher construction costs and less residential building nationwide, it's time to wonder if Myrtle Beach's condominium and resort market is due for a slowdown as well.

At first glance, activity would appear to be normal with an ample slate of oceanfront and inland projects under way or ready to break ground.

But not everyone is enthusiastic about this year.

"The market got a little crazy a year-and-a-half ago," said David Stradinger, founder of Winchester Land and Development Corp. of Myrtle Beach. "When it's like that, you know that a correction is near."

Buddy Hucks of E.F. Hucks Consulting, who tracks real estate sales across the three-county area that comprises the Myrtle Beach market - known as the Grand Strand - added that while the cooling effect of high construction and land costs plus increases in interest rates is to be expected, "slowdown" is a relative term.

"2005 was a record year," he said. "Things in 2006 may not be as good, but they're better than they were in the three years before 2005. The flurry of new projects has also given prospective buyers more choices than before, so the urgency to buy isn't there. The result is a market that is more typical."

Builders Get a Breather

Shaw Dargan III, president of Dargan Construction Co. of Myrtle Beach, said the relative respite in activity is welcome.

"The market needed to slow down because our subcontractors were stretched too thin," he said. Still, "We will have enough work under out belts to keep people busy, and we'll continue to see the market come back."

Dargan added that his company prefers working with local subcontracting firms that have proven their performance and reliability over the years. "There were times when we would consider bringing in someone from North Carolina, but mostly, they're from right here," he said.

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Stradinger said that the self-regulated nature of Myrtle Beach's condominium and resort market helps keep things on an even keel.

"Most large high-rise projects don't move ahead unless 80 percent of the units are sold prior to construction," he said. "Most developers in the area are privately held, reducing the chance of overbuilding. They're less likely to go after speculative projects than publicly held groups."

The focal point of the Grand Strand's major residential and resort projects is along the oceanfront. Dargan's many current projects include the 24-story, 522,000-sq.-ft. Grande Palms; the 304-unit, 21-story Anderson Ocean Club; and Ocean Blue, a 14-story building featuring 36 3,000-sq.-ft high-end condominium units.

Also, Harrington Construction Co. is nearing completion of Magnolia Pointe Condominiums, which includes 35 four-story buildings totaling 1.3 million sq. ft.

Elsewhere on the oceanfront, Bovis Lend Lease of Raleigh, N.C., is general contractor for the 14-story, 531,000-sq.-ft. Tilghman Beach & Golf Resort, while North Carolina-based Landmark Builders of the Triad is working on Prince Resort Condominiums' two 18-story towers totaling nearly 533,000 sq. ft.

Dargan and Stradinger are also collaborating on the new North Myrtle Beach Towers, a $140 million project in North Myrtle Beach that will add another 343 condominium units in two 18-story towers. The two-year construction program is scheduled to begin early this year.

Most expect this less-than-hectic pace for residential construction to be short-lived.

"I think the slowdown is temporary, and that things will be strong again" by the end of 2007, Dargan said. "That's what the experts are predicting, and I hope they're right."

Hucks said continued high prices for land in the area coupled with rising construction costs could influence how quickly the residential market reheats itself.

"Those factors made developments become more marginal, forcing people to think a little more about what they were doing," he said. "Right now, the rate of price growth is more level, not the 25 to 30 percent increases of preconstruction prices that buyers faced before."

Stradinger said most Grand Strand condominium developers are merely waiting for the right time to act. "Some may be holding land for building, but the nature of our market means that they don't have to worry about being left behind," he said.

A Drive to Diversify

As the 13th fastest-growing area according to the most recent U.S. Census, Myrtle Beach has given the region's construction community other markets to watch. From Georgetown in the south to the beach areas across the North Carolina border, homebuilding has been a hotbed of activity, with a host of new neighborhoods aimed at workers attracted by the robust economy and aging Baby Boomers looking for the ideal retirement home.

A new dimension is being added to Myrtle Beach's profile with Chicago-based developer McCaffery Interest's $160 million Market Common mixed-use project. Located on a portion of the former Myrtle Beach Air Force Base, the 3,790-acre redevelopment's first phase broke ground in October. It will feature approximately 400 condominium and townhouse units, plus 375,000 sq. ft. of ground-level retail shops and restaurants, topped by 200 apartments.

San Francisco-based Plant Construction Co. is serving as construction manager for the project, which will also include 29 acres of lakes, community parks and 4 mi. of roads in its $30 million infrastructure program. Subsequent phases call for the addition of a hotel, townhouse and single-family home communities, and other amenities.

Another 143-acre portion of the former Air Force base will be home to a new $228.8 million terminal for Myrtle Beach International Airport. Skanska USA Building of Atlanta is providing complete design-build services for the project, with Gresham Smith and Partners of Atlanta serving as the architect.

Located across the airport's main runway from the existing terminal, the steel-framed terminal will include a 14-gate, 380,000-sq.-ft. passenger concourse, surface parking and a new rental car area. Airside work includes approximately 30 acres of concrete paving and a new taxiway.

Plans called for Skanska to provide a guaranteed maximum price to the Horry County Department of Airports in mid-December, with work on the 24-month project to get started in March.

Something for Everyone

Tourism remains an essential part of the region's economy. The new $400 million Hard Rock Park at Fantasy Harbor is adopting Myrtle Beach's "beach music" tradition to help attract more visitors to what is already the nation's third-busiest tourist destination.

The 54-acre music-themed amusement park, South Carolina's largest single tourism project ever, will include roller coasters and other rides, shops and restaurants, and a multipurpose live music amphitheater.

Hard Rock Park began construction in August under the direction of Hensel Phelps Construction Co.'s Orlando office and is scheduled to open in spring 2008. According to information provided by Hensel Phelps, the project includes 56 one- and two-story buildings with different structural, façade and interior requirements. In addition, an existing 250,000-sq.-ft. former mall will be renovated and incorporated into the park.

With more people arriving in Myrtle Beach to stay, the area's economy is gaining several new elements.

Jim Papadea, business development director for Myrtle Beach Regional Economic Development Corp., said the addition of new home construction component manufacturing plants bodes well for other light industrial projects in the near future.

"Myrtle Beach also attracts a large number of visitors from Canada," he added. "That's led to several Canadian companies exploring opportunities to establish plants here."

Infrastructure construction to support this growth will receive a boost in the coming years thanks to a one-cent retail sales tax that was approved by Horry County voters on Nov. 7. Augmented with matching funds from South Carolina's infrastructure bank, the tax is expected to generate nearly $1 billion over seven years.

Leading the list of projects are the $132 million widening of state Highway 707, two new grade-separated interchanges along the U.S. Route 17 Bypass and upgrades to outlying roads that will help open adjoining tracts to development.

These trends add up to an overall sunny outlook for development and construction in Myrtle Beach. Brad Dean, president of the area Chamber of Commerce, said that while there are some lingering economic concerns over interest rates, "most indices point to more growth, only slower. In other words, we'll be doing things at 50 miles per hour, not 70."