Apartment rental rates on the rise

Mar. 18, 2013 @ 12:11 PM

Charles Wall said he rented a four-bedroom apartment in Blacksburg, Va., for the same cost as he’s renting a loft in the West Village Phase II apartment development in downtown Durham.

“It’s really nice here,” Wall said of the apartment he moved into Wednesday, which he said has high ceilings, hardwood floors, a view of downtown and abundant natural light. A programmer who works on a contract basis, he also cited the location in walking distance from co-working space downtown as an amenity.

The West Village Phase II complex where he lives is listed among the most expensive apartment rental complexes in North and South Durham, according to information dated to March from the real estate market research firm Karnes Research.

The complex was listed by Karnes as having a 97 percent occupancy, and an average rent of $1,542 per month. It topped a list generated by Karnes of Durham’s top five properties in terms of rental rates. One of the projects was the neighboring West Village complex, and several of the others were also in North Durham.

North Durham has seen recent rental rate increases, according to Karnes, – and so has Durham County as a whole. Real estate officials have described an overall trend of declining vacancy rates and higher rents, in the area, followed by an uptick in planned and under-construction new apartments.

“It’s coming out of the recession – it’s the lifestyle of the young that are college educated, have decent incomes, and they’re fueling the demand,” said Ken Szymanski, executive director of the Apartment Association of North Carolina, a nonprofit trade association for rental housing owners, builders, developers, and property management firms.

Szymanski said the “sweet spot” for apartment rentals is people aged 25 to 34. He said that age group doesn’t see the wisdom of buying like they did five years ago. He also said they’re attracted to rentals because of lifestyle choices, such as not having to care for a property and more mobility. He also cited student loan burdens as a detractor to buying.

Citing January data from the Charlotte-based apartment market research firm Real Data, he noted that the average rent in the Triangle was $868 in February, up from $834 in the same month last year.

“Obsolescence – even with 30-year-old apartments, it’s still expensive to maintain, to pay taxes, insurance, personnel, etc.,” Szymanski said. “There’s no such thing as a $400 market rate apartment anymore, they’ve gone by the wayside.”

In Durham County in September, Karnes reported that the average weighted asking rent was $862. That’s up from $843 in September of 2011.

South Durham’s average weighted asking rent was $856 in September, up from $822 in the month in 2011. North Durham had an average weighted asking rent of $874 in September, up from $853 in September of last year.

The highest rental rates are in the downtown markets or urban areas because there are a lot of different amenities there. He added that downtown Durham doesn’t currently have a lot of apartments. There are some complexes planned for downtown and others under construction in the Ninth Street area.

Reece said officials will be watching to gauge the impact of new apartment construction on rental rates. He said everyone’s going to be watching this year, next year, and 2015 as planned or under-construction complexes are completed.

He said certain areas will “weather the storm” in terms of rates, some will cut back, go flat, or start offering specials. But he said he doesn’t expect to see a lot of concessions hitting the marketplace until probably the middle to the end of next year.

“Right now, landlords will continue slight increases on rent, but we will definitely see some adjustments in the near future,” he said.

Bryan Kane, vice president of acquisitions for Federal Capital Partners, the majority owner of West Village, said company officials believe that the most well-located properties with the best amenities will continue to be able to charge the highest rents.

“West Village fits within that description,” he said.

Kane added the overall apartment market is going to see a “great deal of supply” over the next two to three years, which he believes is likely to cause softening in the fundamentals in the business.

Federal Capital Partners is among the developers planning to build apartments in Durham. The firm plans to break ground in the second quarter on a new, 196-unit apartment complex on existing parking lots near West Village.

“Despite this, there will continue to be great opportunity in dynamic locations like the ones where we are developing,” he said.

Wall said in an email that amenities are his biggest draw. The economy and low-interest rates would inspire him to buy right now, he said, but he said it might be because he’s employed.

“I’d have to buy a really nice house to get a pool, workout facility, and courtyard in the middle of a metropolitan center,” he said. “Not to mention the view, and the sense of community that cohabitating with 1,000 of my closest friends brings.”