Baltimore's rentals in high demand, fueling building boom
By By Steve Kilar and The Baltimore Sun
Aug 03, 2013 | 3:46 PM
To win the two-bedroom Canton condo Jillian Rimmer wanted, she offered to pay $75 more a month than the asking rent of $1,600.
It worked: The landlord chose her bid, and she and a roommate live there now.
"I was willing to pay that for the great location and parking," said Rimmer, who is in her early 30s and who moved to Baltimore from Columbia. "I had quite a bit of trouble finding a place. Pretty much as soon as a listing went online, it was gone."
Many interested in urban living face the same problem in Baltimore's competitive rental market, in which a limited supply of quality rentals in popular neighborhoods such as Federal Hill, Fells Point and Mount Vernon have tenants scrambling to secure leases. Developers, meanwhile, are rushing to renovate buildings built decades ago for offices and other uses into apartments, especially in and around downtown, raising, some say, the prospect of another real estate bubble.
"Inventory is very, very low right now. ... It happens all the time that people lose out," said Tania Ellis, a real estate agent who specializes in Baltimore rental properties. Ellis helped Rimmer, who initially tried to rent an apartment on her own, secure the Canton condo. "About 80 to 90 percent of the time you have to bid up the rent."
Paying extra was worth it to Rimmer. She wanted to find a place where she feels safe, and she said she's comfortable in Canton. And it's across the street from a grocery store, a mile from work and near Patterson Park, where she takes her dog and regularly goes to play sports.
"My car is rarely moved," Rimmer said.
If bidding up the rent isn't in the cards, Ellis advises clients to offer a longer lease, two or more years, to keep from losing their desired rental to another applicant. In this market, applicants need to do what they can to sway the landlord, she said.
"With rentals, it's not first come, first serve," Ellis said. "Everything lands in the lap of the landlord."
Some landlords ask to sit down and interview prospective tenants, she said, and weigh factors beyond credit and criminal background checks, including whether the applicants are roommates or a family and if they have pets.
The apartment vacancy rate in Baltimore's city center dropped to 4.8 percent in the second quarter, according to data released Thursday by real estate data firm REIS Inc. Four years ago, the vacancy rate was nearly double that.
The surge in demand for rental housing is not restricted to Baltimore. In 2012, the number of renter households grew by more than 1.1 million nationwide, according to a report released in June by the Joint Center for Housing Studies at Harvard University. It was the eighth year in a row of renter growth, according to the State of the Nation's Housing 2013 report.
Renters make up 35 percent of U.S. households, the report said, and apartment occupancy rates have been trending upward over the past two years in many urban areas, including New York, Seattle, Los Angeles and Miami.
The recent rise in renters is driven by growth in the number of people in their 20s and 30s, according to the Harvard report. Young adults are the most likely demographic group to be renters. Continued weak income and job growth are preventing many would-be homeowners from buying, the report said.
In the past few weeks, rental agent Tammy Nemeroff said she has seen several rental rowhouses snapped up in less than 24 hours. At most, she said, decent properties in popular neighborhoods are leased within two weeks.
"It is very competitive because there's not a lot on the market," she said.
After "Match Day" in March, when medical residents are matched with hospitals, newly minted doctorsflood Baltimore's rental market, she said. And in late summer, as new students and employees move into the city for the start of the school year, the rental market gets squeezed, she said.
Even outside the most popular waterfront neighborhoods, rental homes get snatched up quickly, Nemeroff said.
Canton is "pretty much at capacity," Ellis said, so demand is spilling over into Brewers Hill and Patterson Park.
Real estate developers are making big bets to satisfy renters' appetite. Hundreds of apartments are expected to open in the next year in downtown buildings originally intended for commercial use.
The Time Group, a Baltimore-based real estate developer that also manages apartment buildings, is spending $30 million to convert the Hochschild, Kohn & Co. department store warehouse on Park Avenue in Mount Vernon into 171 apartments.
Dominic Wiker, the project's development director, said people started calling to be on a waiting list for 520 Park as soon as a sign went up on the side of the building last month, even though it won't be ready until next summer.
The Time Group has two other buildings within blocks of the six-story former warehouse that are full and have waiting lists, justifying its investment, Wiker said.
Wiker called the push for apartments "more sustainable" and "more supported by demography" than the condo boom of the mid-2000s. He thinks the Hochschild, Kohn building will attract people in their 20s and 30s, largely drawn to Baltimore because of its universities and hospitals.
"This generation is less interested in driving; they're more mobile" when it come to jobs, said Michael Evitts, who leads research for the Downtown Partnership of Baltimore Inc. "They don't want to be tied down on the weekends with maintaining a property."
The apartment plans in the pipeline, Evitts said, are "not going to come close to meeting" the demand for housing over the next few years in Baltimore's core as projected by the partnership.
In addition to 520 Park, major apartment projects are under way at the 34-story 10 Light Street office building; the former Baltimore Life Insurance Co. building at 301 N. Charles St.; and the former Federal Reserve building near the courthouse complex on East Lexington.
"We've had a significant amount of interest in the apartments, sight unseen," said Ahmad Hajj, a principal at Broadwater Capital LLC, a Washington-based real estate company that is finishing up a conversion of the Odd Fellows Hall at 300 Cathedral St.
Many of the red-brick building's 59 apartments are being leased to medical residents at the University of Maryland Medical Center and Johns Hopkins Hospital, who don't have the time or live too far away to tour the property before signing a lease, Hajj said.
The universities and hospitals are significant drivers of Baltimore's rental market. That could be a problem if developers are not cautious about overbuilding, said Jake Wittenberg, vice president of Harbor Development LLC, a general contracting and construction company. His Baltimore firm has been hired to convert a commercial building across from the Hochschild, Kohn warehouse into 15 apartments.
"The renter market around institutions is going to be strong always, but that's a limited pool," Wittenberg said. "I think there's a cap on the number of units required in Baltimore City."
Another cause for caution is that our culture supports home ownership, he said. As the economy improves, there's a likelihood that rental demand will decline. There's no mortgage interest deduction for an apartment, Wittenberg noted.
"Doomsayers fear that households who deferred purchasing a home while prices and mortgage rates remained flat may now begin to buy homes and siphon demand for rentals," said Victor Calanog, REIS' vice president of research and economics.
Steven Bloom doesn't see cause for concern. He runs Baltimore operations for PMC Property Group, which manages hundreds of apartments in converted buildings in the city center. They are all at or near capacity, and the company's newest project, near Mercy Medical Center on St. Paul Street, opened Thursday with 30 of the 40 available units leased.
"My vision is all of Charles Street will be more residential," Bloom said at the opening. "There's so many 22-year-olds out there, and they want to be downtown. They don't want to be in a garden apartment off York Road."
As he said this, Lauren Hutchinson, a 22-year-old from Frederick, was moving into what PMC calls 521 St. Paul Street. She's starting law school at the University of Baltimore and wanted a place near there, she said. She won't have a car and wanted to be in a walkable location near public transit.
The building's "walking score" was a prime selling point for Bianca Stacey, who also was among the newcomers Thursday. She works for Microsoft and her fiance recently started his residency at Johns Hopkins Hospital. The couple, in their mid-30s, moved from New York, and Stacey marveled that the rent on their brand-new, two bedroom apartment is only about $1600 a month.
"This is a really great place for the price," Stacey said. "In New York, it would be a steal."