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At the start of the year, with the nadir of the recession still unclear, Charles Sampson’s real estate office took the steps it felt were necessary to stay afloat. The island-based realty company laid off staff and scaled back its office hours from five days a week to four. That scenario has been common across the region over the past two years as businesses tied to the oncebooming housing and home construction market were forced to react to the slump.
Then, in early June, the office did something unexpected: It started hiring staff again, and returned to a full five-day work week. “We kind of thought the market had turned a little bit,” Sampson said.
That optimism was spawned by the surprising business data that were rolling in for the year: More properties have been selling every month since October than the previous month. The spring brought maybe the biggest harbinger: April 2009 was the first month that was busier than the same month in 2008 or 2007.
“October might have been the bottom,” Sampson said. “All that is good.”
Recession-bruised business owners and weary market watchers are still too nervous to praise their shifting fortunes just yet. But indicators, like the change at Sampson’s office, have slowly been accreting. They hint that, just maybe, the recession is losing its hold and economic recovery is on the way.
Hilton Head’s wealthy residents and highend amenities distinguish it from the rest of the country, but it may be a barometer for how those at the top of economic ladder are emerging first out of the slump.
Home sales
To take the area’s economic temperature, the real estate market is a good place to start:
When the housing bubble burst in 2007, the rapid pace of home construction slowed to a crawl. That left many of the new developments on the mainland stalled or incomplete, reducing or eliminating many of the construction, landscaping and real estate jobs that went with it.
Renewed interest in real estate — at least for existing homes — is starting to appear.
In Hilton Head Plantation, for instance, the majority of homes that sold for the first six months of the year were under $500,000, Sampson said. But there were also a few highend properties on Ribaut Island selling for between $1 and $3 million. Investors are seeing the bottomed-out prices and jumping on them.
“That says: ‘Hmm,’ ” Sampson said. “The smart money maybe is coming back.”
Tourism
The next measure to take is the tourism industry. Last summer, recession fears and high gas prices kept some visitors away. Others still made the trip to Hilton Head but saved money by staying in their time rentals to cook or have cocktails at home instead of filling tables at restaurants.
At the Hilton Oceanfront Resort, the year started out bleak and management was bracing for a Spartan summer. Occupancy was down as much as 15 percent from last year.
“It was obviously the worst,” general manager Earl Nightingale said. “February, March and April were pretty tough times.”
But by June, the story had started to change. June was down only 4 percent from last year. His predictions for July showed that month could only be down about 2 percent from last year.
“I thought that was a very strong indicator, at least looking ahead, that we’re starting to pull out of this,” he said. “At this point, we’re pretty encouraged.”
Last summer, when gas was flirting with $4 a gallon and fuel shortages were plaguing Atlanta – a key island tourist feeder market – Nightingale fielded calls from would-be travelers asking if there was enough gas on the island to ensure they got home. Now with gas prices more leveled off, people feel freer to travel.
Shopping and dining
A year ago, there was no question that the recession had started to infiltrate even the elite corners of Hilton Head.
Jewelry stores reported selling more silver instead of gold. Caterers noted a decline in extravagant events and opulent dishes. Even yacht sales dipped by 20 percent off the average in some places. Business at Signature Flight Service, which sells fuel and other services to private pilots at Hilton Head Island Airport, was down 7 percent last May.
Meanwhile, grocery stores, fish markets and liquor stores saw stellar business as travelers and residents looked to cut dining costs. The market was less kind to restaurants and bars. A few long-standing local spots have closed over the past year — including Sticky Fingers, Riders Lounge and Myrtle’s Bar and Grill in Bluffton.
But whatever shakeup there was, it looks to have already done its damage. Restaurants on the island appear to have suffered the worst of the downturn and have been adapting to the economy, said Ann-Marie Adams-Arrington, executive director of the Hilton Head Area Hospitality Association.
And, in a hopeful sign, new restaurants have been popping up in recent months. Some of those places are actually using the recession to their advantage, she said.
“We’ve seen some resurgence of what I call the small boutique business,” she said. “It’s something that’s very niche-y. It’s a small business owner, with very little start-up and build-out required.”
While fine dining is still suffering, a new hot dog restaurant that opened on the south end, for instance, may fill the low-cost dining need, she said. Where storefronts have sat vacant for a few years, new business owners are able to lease the space at a good price. Sticky Fingers restaurant on Palmetto Bay Road closed up shop earlier this year, but now the Smokehouse is working on moving into that location to expand beyond its cramped location near Coligny Beach.
Events
Companies elsewhere have also been keeping their eyes on the island and awaiting an economic resurgence. About three years ago, BMW announced it was pulling out as a major sponsor of Hilton Head Island Concours d’Elegance and Motoring Festival, the island’s second-biggest event after The Verizon Heritage golf tournament, due to economic concerns. But this year the automaker has signed back on as a top-level sponsor, meaning the company is contributing at least $20,000 in cash and in-kind contributions.
Event chairman Phil Capossela, who retired four years ago from a 30-year career at BMW where he served as a regional vice president, said the investment alone holds optimism for the health of Hilton Head’s economy.
Hope for the future
On the mainland, Clyde Harris is putting stock in long-term economic resiliency. His American Hotel Development Partners is preparing to open a new $12 million, 124-suite extended stay hotel next to Sun City Hilton Head in October. The Candlewood Suites broke ground in winter of 2008, a time when most construction in the area had slowed dramatically. But the idea of the hotel is to fill in an underserved niche market of extended stay visitors, he said.
“To be honest, I think we’re delivering the product at probably the right time. You’ll have to go back quite a few years before the last new hotel was built out there,” he said. “I’m not building this for results in the next six months. I’m building it for results in the next six years. The housing market is going to turn.”
