Apartment Rents Are On The Rise
By SHANNON BEHNKEN, The Tampa Tribune
Published: February 14, 2008
If you plan to rent an apartment in Tampa Bay area, you soon may have more options, but you’ll have to fork over more money in rent, two area apartment builders said Wednesday at the International Builders’ Show in Orlando.
“Rent increases will exceed historical averages over the next three to five years,” said Steve Patterson, CEO of Zom Inc., an Orlando-based apartment builder with several Bay area projects.
That’s because demand is expected to increase dramatically over the next several years, as a nationwide credit crunch makes it more difficult for people with poor credit to qualify for home loans. Also, more homeowners are expected to lose their homes in foreclosure and turn to the rental market instead.
Builders that have concentrated on condominiums in recent years have turned exclusively to apartment building, said Bill Donges, CEO of The Lane Co., based in Atlanta.
“Condos are over,” he said. For example, the Watermark, an apartment complex under construction on Kennedy Boulevard near WestShore Plaza, originally was planned as a luxury condominium. Donges said his company now plans to rent the units.
The Lane Co. also has plans to build more apartment complexes in the Tampa Bay area this year, Donges said, noting that he plans to scout potential sites over the next couple of weeks. “Tampa is a place apartment builders want to be right now,” he said.
It hasn’t always been that way.
In 2005 and 2006, the Tampa Bay area lost much of its apartment inventory to companies that bought the complexes and sold units off as condos. Since 2001, about 31,000 apartment units were converted to condos in Hillsborough, Pinellas, Pasco and Polk counties, the Cushman & Wakefield real estate firm has estimated. The condo craze took over and apartment building slowed, Patterson said. There weren’t enough buyers to absorb all the inventory, though, and many of the units have reverted back to apartments.
Over the past year, rental occupancy rates have fallen from between 96 percent and 98 percent to between 88 percent and 92 percent in Hillsborough, Pinellas and Pasco counties, said Michael Slater, president of Triadd Research & Consulting in Tampa.
As a result, apartment owners have offered concessions such as a month or two of free rent to lure tenants. Rental rate growth declined to between 1 percent and 2 percent in 2006 and 2007, compared with 6 percent to 13 percent in 2005 and 2006, Slater said.
Because of the slower apartment construction, there won’t be enough units to meet the demand over the next several years, unless builders start building more apartments soon, the builders said in Orlando.
In the Tampa Bay area, that is expected to happen this year; 18 apartment projects are under construction or planned to break ground soon, Slater said. At the Builders’ Show in Orlando on Tuesday, three of the nation’s prominent economists gave their views of the building industry.
David Seiders, chief economist with the National Association of Home Builders, which hosts the annual Builders’ Show, said the stimulus package approved by Congress will spur some growth in the economy but won’t go far enough.
What’s needed, he said, is tax credit to stimulate home buying.
Interest rates are at a 2 1/2 -year low and are expected to dip more this year. This is intended to encourage potential homeowners to buy, but that may be offset by credit tightening in the lending industry, said Frank Nothaft, chief economist for Freddie Mac. “If you qualify and you are a prime borrower wanting a conforming loan, and you can make a down payment, it’s a great time to buy,” he said. “But those are big ifs.”
The economists differed somewhat on projections for the coming year, but generally agreed the housing slowdown will continue until at least the third quarter. Prices are expected to continue falling across the nation and it will be difficult to sell homes.
David Berson, chief economist for The PMI Group, said he thinks the county fell into recession in early December, though some economists don’t think recession has happened yet. He said delinquencies and defaults are expected to rise and will keep the market from turning around until 2009. “A lot of homeowners who purchased in recent years are under water. They owe more than their homes are worth,” he said.
Reporter Shannon Behnken can be reached at (813) 259-7804 or [email protected]
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Rae Catanese and Michelle Jordan
Prudential Tropical Realty