Triangle landlords deal to lure and retain renters

Staff WriterApril 30, 2009 

Kevin Connolly's wallet was hit with a one-two punch late last year.

First, the laser-printer technician had his work hours cut back, robbing his budget of about $200 a month. A few weeks later, his landlord at Wakefield Glen apartments tried to raise his rent by $200 a month.

He couldn't afford the new rate. But Connolly was reluctant to move from the North Raleigh complex because it was near his daughter's school.

So he negotiated with his landlord, who agreed to bump the rent by only $96.

Connolly knew he had some leverage. After all, he saw what his neighbors did when faced with more expensive leases. "You were seeing the empty apartments, the moving trucks, people moving out," he said.

Triangle landlords, who prospered when the booming economy made the Triangle a magnet for jobs, are having to be more flexible to retain and attract renters who are trying to economize.

As the economy has fallen, so too has the number of people able to pay rent. At the same time, many renters still pay record rents, a remnant of better times.

"A lot of the population is in gridlock," said David Ravin, president of Crosland, a Charlotte company that is building about 450 apartments throughout the Triangle. "You can't sell your house. No one is really hiring, so you're not necessarily coming to look for new jobs. You're afraid to sign a new lease because you might be a little anxious about your current situation. ... Everyone's just sort of waiting and watching, which in turn is leading to nobody doing anything."

Square that up with growing supply, and "right now, there's a lot of options for renters," he said.

The unemployment rate, a strong indicator of apartment demand, was 8.3 percent in the Triangle at the end of last month, up from 4.2 percent a year earlier.

During the same period, the region's apartment vacancy rate climbed to a six-year-high of 10.3 percent, up from 9.2 percent a year earlier, according to new data from the Triangle Apartment Association.

As more units stayed empty, landlords slowed rent increases and started offering more perks, such as free months of rent. The average monthly asking rate climbed only a dollar -- 0.1 of a percent -- to $805 during the year ending March 31. Rents, on average, increased about 3.4 percent annually the previous 10 years.

And about 35 percent of apartment communities are offering concessions, TAA data show. While that's up a hair from 33 percent a year ago, it's the first increase since 2005.

For now, "property managers are being a little more aggressive in retention," said Brian Reece, managing partner at Karnes Research, the Raleigh firm that collects data for the apartment association. "But they're not going to give away the shop."

That may change in the months ahead as a receding pool of renters meets an overflow of supply. At least 3,841 new apartments were built during the year that ended March 31. That's the most in any year since 2002. And 3,084 more units are being built, down just 6 percent from a year ago.

Meanwhile, there's competition from single-family homes for rent and, increasingly, those for sale, as prices drop and incentives for first-time home buyers take hold.

"We're going to see rent growth slow down," Reece said. "And we're going to see creative concessions coming back to the marketplace."

Landlords think the market will bounce back quickly. A big part of their rationale: The lending environment has essentially stopped proposed projects from coming out of the ground. "What everybody is anticipating is that it will be a landlord opportunity when the world comes back," Ravin said, "because the amount of supply has never fallen off this rapidly."

Until it does, even Connolly may adjust his strategy.

Despite his second job, working part time at the Target in Knightdale, he's dipping into savings each month to cover the higher rent.

A few weeks ago, he began searching for a roommate to share the one-bedroom apartment with his daughter and dog. He was hoping someone would chip in $450 per month, about half the total rent. "Times are tough," Connolly said. "And I thought it would be great if I would be able to find the right person."

By the end of last week, only one person had responded. "I might have to go down in price," he said.

And on Tuesday he did. He's now asking $400.

jack.hagel@newsobserver.com or 919-829-8917

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