'96 market for rentals expected to pick up Researchers forecast rising rents while demand holds steady

Brighter days may be ahead for apartment owners in the Baltimore area, according to two national real estate forecasters.

"[Baltimore] is coming out in the upper third of the markets that we look at," said Hugh Kelly, an economist with New York-based Landauer Associates, who is developing his 1996 forecast. "It's not a sexy market, but it has good solid fundamentals.


"It has a very good balance between multifamily housing being built compared to the underlying demand."

That's not the case around the country, because a 250,000-unit demand for new apartments is being outrun by a 310,000-unit of level of construction, Mr. Kelly said. He explained that rents in the Baltimore market increased 2.5 percent over the past year, and over the next year, they will rise equal to the inflation rate.


Evan J. Griffiths of M/PF Research in Dallas said he has seen an increase in the occupancy rate over the past year in professionally managed Baltimore-area apartment complexes he samples for institutional investors. The rate is 96.2 percent, up 1.2 percentage points since the third quarter of last year. That's better than the national average for comparable apartments, which he pegs at 93 to 94 percent.

Mr. Kelly's data -- also sampling investor-grade garden apartments -- shows a Baltimore rate in the 95 percent range, with low-end, pre-1970s units dipping to 92 percent and newer complexes at 95-96 percent.

"In Baltimore, there's been a modest improvement in the vacancy rate since the second quarter of 1994," he said.

According to Mr. Griffiths' data, Baltimore-area apartment rents have risen 2.4 percent over the past year.

At midyear, he found that one-bedroom units were averaging $555; two-bedrooms were $613 and three-bedrooms, $766. The newer the apartment unit, the more expensive the rent, Mr. Griffiths found.

Apartment complexes built in the past five years were averaging around $800 per unit, according to M/PF Research.

M/PF surveys around 8 percent of the professionally managed large-scale communities, which Mr. Griffiths calls the "most active segment" of the apartment market.

The complexes are in the 200- to 250-unit range, and do not include subsidized apartments.


The M/PF survey notes that metropolitan Baltimore's employment base expanded by 7,300 jobs in the year ended in the second quarter of 1995, what the research firm describes as a "moribund" 0.7 percent increase for a region that saw growth in the 20,000- to 40,000-job range in the 1980s.

Multifamily construction continues to be flat locally, according to M/PF, contributing to the improving occupancy rate and rent outlook for owners. Baltimore-area localities granted permits for 1,882 new units for the year ended in June, virtually the same as the previous year.

During the late 1980s, as many as 5,000 units a year were being built locally, according to M/PF.

Nationally, the apartment industry is coming out of a slump that was caused by overbuilding spurred by favorable tax laws.

The slump was aggravated by a downturn in household formation, according to Jim Bowe, a spokesman for the Washington-based National Multi Housing Council.

"There was a real excess of capacity coming out of the '80s," Mr. Bowe said.


But there's been "very little product" built nationwide over the past few years, said Lewis Bolan, a Northern Virginia real estate consultant who also teaches at Johns Hopkins University's Allan L. Berman Real Estate Institute. "We're pretty bullish on apartments," Mr. Bolan said.