Early bird tickets for Baltimore’s BEST party on sale now!

Scrambling for renters The extra mile: Apartment managers are offering more services in a bid to attract and retain tenants.

THE BALTIMORE SUN

When Elaine Chinn attended a recent apartment conference in Orlando, service was considered so critical that Disney officials were invited to teach lessons.

"They're always smiling, and the parks are spotless," Ms. Chinn said. "We have to live up to our renters' expectations."

Ms. Chinn, director of marketing at Community Realty Co. Inc., which manages 13 apartment communities in the Baltimore area totaling 6,500 units, says that to compete these days, her company has to offer more than a good floor plan. Services range from offering community pavilions, aerobics, karate, spas, courtesy vans and fax machines.

Community Realty isn't alone. The Time Group, which manages about 20 properties in the area, rents videos at some of its properties and may consider day care in the future.

Hit hard by the recession, changes in tax and banking laws, and falling interest rates -- apartment managers are scrambling to attract and retain renters. Nationwide, the average length of stay is a year and a half. To increase that length as well as attract new renters, managers feel that going the extra mile is essential.

"Our customers are expecting more," Ms. Chinn said. "They want all this. They don't want to spend $100 a month at a gym."

"The pie is smaller and everyone wants a piece," said P. J. Widerman, president of the Apartment Builders and Owners Council of the Home Builders Association of Maryland, which represents 156 members and 130,000 rental units. "The renter is more demanding of quality for the money they pay. They shop and compare. The dollar is precious and they want the best value."

Apartment officials didn't always have to scramble so hard. During the real estate boom of the 1980s, apartment developments geared for the 80-million baby-boomer market flew up as fast as developers could build them.

"They were overbuilt in the '70s and '80s, but we were able to fill them," said Jeff Matthai, president of JFM Marketing Associates Inc. of Sparks, which promotes several communities across the state. "The markets changed and tax shelters fell away in the mid-'80s. It discouraged builders and you saw vacancies."

In the early '90s, the bottom dropped out of interest rates and home-buying soared. Great for buyers, but not for apartment owners, whose vacancy rates rose to the 6 percent to 10 percent range (when 5 percent is the absolute highest vacancy acceptable).

"Rents were maintained, if you were lucky," said John Martonick, vice president and treasurer of the Home Builders Association. "All through 1993 and 1994, it was impossible to do significant rent increases."

As rents flattened, building and health regulations and insurance costs all kept rising -- an increasingly expensive burden to the industry.

"We're hit with everything," said Ms. Widerman, who is also vice president of Partners Management Co., which manages 5,000 units. "It's a constant battle."

"Lead programs are so far beyond the intent of the law our members estimate it would take $15,000 to $20,000 an apartment to meet the regulations. That's $20 million for 100 units," Mr. Martonick said. "Where will you find it?"

Other examples he pointed to included a movement for increased funding of apartment inspectors in Baltimore County. Even at $10 a unit, it's a huge amount of money, Mr. Martonick said. In Harford County, he knows a builder who is being required to pay the county $8,500 per unit for a water hookup.

The economic climate launched the give-away market. While rents froze, concessions of up to two months' free rent became common, security deposits vanished, discounts appeared on one-year leases, and vacations, free televisions and other perks emerged. Area rents, which increase 5 percent to 7 percent in a good year, froze and have remained flat.

Although the concessions and perks saved many managers from bankruptcy, many others couldn't survive, closed their doors, and projects were sold at auction.

Turning a corner

Last year, the industry began to turn a corner as interest rates began to creep up once again -- but the struggle is far from over. Market projections vary from cautiously optimistic to bleak -- and are hinged on the general economic and employment trends.

"There are many outside factors that determine any market. I don't see prospects as very good," Mr. Martonick said.

"It depends on the type of clientele," Ms. Widerman said. "Because the economy hits lower-income folks first, at entry-level jobs, they lack the financial resources if they lose their jobs -- like having savings for two to three months' rent. They move back home or in with other people."

"There's still insecurity, especially in Maryland with all the layoffs," Mr. Matthai said.

"Few projects make sense now. It takes three to five years to complete and rent them, so it's costly," said Josh Fidler, president of Chesapeake Realty Management, which owns and manages 17 communities totaling 4,000 units. He is still building apartments and is optimistic about the future, but only in "well-defined submarkets where performance is excellent."

The hottest areas for construction will continue to be the newer suburban, professional centers of Owings Mills, Columbia and White Marsh, builders predict.

Mr. Fidler, who is building a 500-unit project in Owings Mills Town Center and adding units to one of Chesapeake's White Marsh communities, noted that for new construction to make financial sense, landlords need to charge about $700 per month in rent to break even on a typical two-bedroom, two-bath unit. Rents for three-bedroom units often range in the $900s.

To afford that rent, target renters earn about $25,000 to $27,000 per year in income -- and landlords and builders hope for more incomes in the $30,000 range to support new building.

Those apartment communities that do maintain higher occupancy rates survive not so much by give-aways and free rent deals, but because of increased service.

"You'll start seeing a maintenance guarantee, hair salons, valet service, restaurants, concierge and more warranties," Ms. Chinn said. "They're willing to pay the [rent] money if they see it's valuable -- and they don't have to pay for a gym, or snow removal or other things."

Day-care centers will soon appear, as well, according to Mark Caplan, vice president of the ABOC and vice president of The Time Group.

Apartment conferences go so far as to present talks on multicultural protocol -- such as when eye contact is appropriate and when a handshake is or isn't considered polite, so that managers don't offend a prospective tenant from a different culture.

Service has extended to the entire life of the lease, according to Mr. Caplan, whose company does customer satisfaction surveys, leaves response sheets after mechanical repairs and conducts satisfaction interviews when a tenant is leaving.

"The industry is management-intensive," Mr. Caplan said. "You have 1,000 square foot per tenant, vs. maybe 50,000 per square foot for an industrial tenant."

'Beware of the glitz'

Even with all of the new service, Mr. Martonick warns renters to "beware of the glitz."

"A manager can hide a less-than-adequate apartment by a trip to the Bahamas. Look at the basics, the history and the number of tenants who are happy," he said.

Apartment managers are constantly studying demographics and preparing for changes in the rental population. New market horizons include the increasing senior citizen population and "baby-busters," children of baby-boomers.

Senior citizens seem to be the most sought-after renters within the new niches.

"We're 8 to 10 years from a senior boom," Mr. Fidler said. "There's significant opportunity there in the next decade. Their current homes will free up and become an option for young buyers."

"Our greatest desire is to have seniors here," Mr. Matthai said. "We're always working toward it, but it's still a small part of the apartment community. They often go into nursing homes or stay in their own houses."

Some builders and owners view housing for lower-income families as a good niche, though that's a controversial topic, as shown by the recent debate over renting to low-income families in higher-income, predominantly white areas of Baltimore County.

The ABOC has an information line for landlords, tenants and owners who have questions or concerns. Call 265-7400.

Occupancy

Occupancy rates in the Baltimore-area apartment market, by age of complex.

Pre-1970s ... 91.8%

1970s ... ... 97.4

1980s ... ... 96.9

1990s ... ... 95.0

Source: M/PF Research Inc., Dallas, Texas

Copyright © 2019, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad
41°