Not that long ago, owning a residence seemed attractive in a number of ways. The availability of
mortgage money was abundant in many
forms, down payments were nominal
and interest rates were low. This drove
demand for sales and, as such, prices
rose rapidly.
As a result, there was a buyer’s perception of huge increases in equity and subsequently net worth. Then the credit
markets collapsed and this once relatively safe haven investment changed
quickly.
“The change came fast and the depth of
the economic downturn was more
severe than anyone had anticipated,”
says Jim Bobbitt, a senior vice president
and multihousing specialist in Tampa
with CB Richard Ellis. “With this change
came lifestyle decisions for many that
had to match the uncertain nature of the
economy. For some, renting provides the
right solution. Flexibility in lease terms
and lower cost of occupancy is attractive as economic factors become more
unsettled.”
Smart Business talked with Bobbitt
about the changes over the past year,
how they’re affecting rental demand and
how the supply side is responding.
How different is today’s rental market from
one year ago?
The change we have experienced has
been constantly evolving, but it is the
product of significant market influences.
After many rushed into the heated housing market, it became apparent that the
fee ownership of housing for many was
starting to unravel. Many owners had
put themselves in a position where they
now had mortgage obligations on residences that they could no longer afford
to carry, nor could they afford to sell
due to falling values. In addition, pending job losses and a tough credit market
were clouding the future. As the downturn deepened, some owners turned to
leasing their own property. In more
severe circumstances, forced foreclosures became more commonplace. All of
these factors played into changes on
both the supply side of the equation as
well as the type and number of potential
renters in the market.
Has this movement affected the value of
apartment properties?
Overall, I would say that it has helped
to further stabilize the multifamily market. While leasing has indeed become a
viable alternative, there are some factors
to consider. As noted prior, many single-family homeowners have turned to leasing their homes to avoid default. This
has added new inventory to the rental
market. In some cases, properties developed or converted to condominiums
have now entered the rental market, as
well. Together, these have increased the
overall supply side of properties for rent.
Keep in mind, however, that leasing in a
potentially distressed situation can have
disruptive and unsettling consequences
for a renter. Established apartment communities with experienced ownership
and management can significantly mitigate unforeseen issues. As the nontraditional rentals exit the market over time,
we expect that quality rental properties
will see solid appreciation.
It appears then that this is a good market
for prospective renters?
It is. Many of the properties available
were built for ownership or to effectively compete with for sale properties.
Many of these have attractive upgrades
such as granite countertops and new
stainless appliances. In addition, the
amenities such as pools, fitness centers,
business and social venues all contribute
to an attractive lifestyle. Add that to a
competitive market and you have
aggressive pricing for at least the near
term. Renters are getting better properties for very attractive rates. On a broader scale, this is an important factor in
helping to attract jobs to our area. Cost
of living, once a traditional advantage in
Tampa, had dissipated with the run up in
prices. Now quality properties at reasonable rates will be a key factor in attracting potential new businesses to our area.
Can we expect to see new properties added
in 2009?
Yes, we will see some new additions to
the market this year. The planning and
permitting processes are such that these
are projects that had been committed to
some time ago and will finally come to
fruition this year. In addition, we are seeing interest in potential sites for longer-term projects. Land prices have come
down substantially, which is a key component of future development. While we
all struggle with the challenges of today,
there are those who are actively positioning for the eventual recovery.
Unquestionably, apartment living will
continue to play a significant role as the
very mobile next generation looks to
enter the work force.
JIM BOBBITT is a multihousing specialist and senior vice president with CB Richard Ellis in Tampa. Reach him at (813) 273-8410 or
[email protected].
