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Columbus Apartment Rental Market Getting More Expensive

Home Forums General Columbus Discussion Columbus Apartment Rental Market Getting More Expensive

Viewing 15 posts - 106 through 120 (of 150 total)
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  • #1093912

    welkstar
    Participant

    Luxury is thrown around so often as a marketing term for apartments that it has lost all value.

    “Luxury” often just means wood-like floors in 40% of the apartment, “granite” counter tops, one semi-fancy looking light fixture, and new appliances. Most of the time everything is a plastic imitation of the real thing. This becomes especially apparent when you’re seeing many units at one time, like the Urban Living Tour. All the new stuff looks the same. Layouts, fixtures, and finishes have become homogenized to maximize profits.

    [Rant courtesy of one frustrated architectural designer/apartment renter.]

    #1093917
    Jason Powell
    Jason Powell
    Participant

    Many keep saying that we should keep building “luxury” apartments because there is enough demand for it and that “that’s what the market wants”. That’s fine but the market also wants market rate and affordable units as well and very few are providing them. In fact, I would argue that the largest number of potential downtown residents are being left out in this apartment boom. I’m all for the continued pace of luxury apartment construction if the demand is there, but we cannot forget about the Average Joe. Rents can be brought down by NOT providing rooftop decks, fitness facilities, stacked parking, amenity after amenity. Not everybody wants those things. Many people care more about living in the neighborhood, whether that be for the “cool factor” or whether that be for proximity to work. It would also help if the city directed more resources and incentives for the developers to tap into in order to build these more affordable units. Hell, 50 “affordable” (whatever you want to call them) units would be spoken for in week…..with a waiting list. The demand is there. These developers just need to figure out the economics of it and get away from the notion that only “luxury” sells.

    #1093929

    Nancy H
    Participant

    Jason, you missed my point. Welkstar said it better than I did.

    Right now they are building market rate apartments. They are just charging luxury prices.

    No developer is going to build apartments and rent them for $500 to $750 per month when they already have people waiting in line to rent them for $1200 to $1500 (or more).

    #1093931
    Jason Powell
    Jason Powell
    Participant

    That’s why the city needs to implement more affordable housing programs, incentives and inclusive zoning. We can make it worth the developers while to include units that are income based or just under market rate. All we are doing right now is creating a neighborhood of income segregation, which in the long run will do nothing but result in a homogenous and, to some, hostile and unwelcoming environment.

    #1093948
    King Gambrinus
    King Gambrinus
    Participant

    The “problem” is the current level of demand. If there’s a line of people willing to pay $1500 a month because I tossed in granite countertops and “stainless steel” appliances than I’m going to choose that option and the bank is going to want to me to choose that option. The demand is so high that you don’t even have to actually build a luxury property to command high end prices. Look at the Atlas building (existing building, historical tax credits, cheap renovation), but they don’t even have to charge lower rents because there are people who will pay whatever it takes to live there.

    I think at some point that high end demand has to run out. The newly built stuff will always tend to be higher end, have the latest features, demand the highest rent and offer the highest return to the developer. But the other older properties are actually going to have to compete with one another and some will have to drop their rent to stay full. Downtown housing practically didn’t exist 10 years ago, so everything is new enough to command high rents, especially with the demand the way it is.

    I think the only way you get newly built “affordable” housing is with subsidies and if you’ve got developers willing to build without them why spend money you don’t have to. At some point the market will figure it out.

    #1093954

    Alex Silbajoris
    Participant

    When I sold my house I thought about renting for a year or so while shopping for another house. But at a thousand dollars a month (or more) I’d evaporate at least $12K. So I bought this place for cash, and now I’m working to increase my equity.

    #1094205

    News
    Participant

    Bled dry by high rents
    By AIMEE PICCHI
    September 21, 2015, 12:01 AM

    The rule of thumb for housing affordability is to keep rent payments to below one-third of income. Unfortunately, a growing number of U.S. households are going far beyond that measure.

    READ MORE: http://www.cbsnews.com/news/bled-dry-by-high-rents/

    #1095687

    News
    Participant

    A Bleak Future for Renters
    GILLIAN B. WHITE SEP 21, 2015

    Things haven’t been easy for renters over the past few years. Low vacancy rates—as more people move into rentals and fewer people move out—have meant skyrocketing prices. Add in years of stagnant wages, and it’s easy to comprehend why making rent is becoming a more difficult prospect for many families. And according to a new report, things may only get worse in the decade to come.

    READ MORE: http://www.theatlantic.com/business/archive/2015/09/a-bleak-future-for-renters/406453/

    #1095777

    InnerCore
    Participant

    The “problem” is the current level of demand. If there’s a line of people willing to pay $1500 a month because I tossed in granite countertops and “stainless steel” appliances than I’m going to choose that option and the bank is going to want to me to choose that option. The demand is so high that you don’t even have to actually build a luxury property to command high end prices. Look at the Atlas building (existing building, historical tax credits, cheap renovation), but they don’t even have to charge lower rents because there are people who will pay whatever it takes to live there.

    I think at some point that high end demand has to run out. The newly built stuff will always tend to be higher end, have the latest features, demand the highest rent and offer the highest return to the developer. But the other older properties are actually going to have to compete with one another and some will have to drop their rent to stay full. Downtown housing practically didn’t exist 10 years ago, so everything is new enough to command high rents, especially with the demand the way it is.

    I think the only way you get newly built “affordable” housing is with subsidies and if you’ve got developers willing to build without them why spend money you don’t have to. At some point the market will figure it out.

    I think this is starting to touch on the issue. From a developers point of view you aren’t going to ever build something aimed at the middle of the market. That just doesn’t make economic sense. The finishes, amenities, etc. aren’t really going to make that much difference to the cost. That’s more about making extra money on the margins and in the current case doing it because it has now become the standard. Look at it this way, in todays world would a car manufacture really make a car without power windows or a radio just so the price could be $500 cheaper? No it’s just included in the base price and if someone can’t afford a new car then they buy a used one.

    So all new development is built toward the top of the market. The only differentiating factor is location. You could build to the top of the market in a urban location where rents are $2,000 a month or build to the top of the market in a suburban location where the rents are $1,300 a month. And the biggest issue there is price of land.

    If you want middle of the road rents then you need to go to Class B buildings which by definition can’t be a brand new buildings. So in most cases these Class B buildings are simply buildings that were Class A years ago and are starting to show their age and therefore slipping to Class B. Again the used car. The other way to get Class B are really old buildings that are Class C that get a light renovation to spruce them up. Think taking an really old building and throwing in new appliances and flooring.

    The reason you’re not seeing a lot of the middle of the road Class B pricing is that in most of the desirable urban locations there isn’t a current stock older buildings that can be converted to Class B. It’s just all brand development. Traditionally in Columbus all the apartment housing was built in the suburbs and if you look around those areas you will find plenty of Class B middle of the road buildings. The problem is that people don’t want to live in those locations as much anymore.

    So in the short term people are going to have to choose. The people who can afford it will move into the urban areas and the people who can’t will have to move into the older suburban areas and wait for the stuff that is new now to start getting old. When they’re building new apartments 10 years from now by then Arena Crossings for example will be showing its age. You can already start to see it now where it has formica countertops, the sinks aren’t undermounted, plastic tub surrounds, etc. etc.

    #1095780
    jbad
    jbad
    Participant

    not sure I’d agree w this line of thinking really. Class A or B categories may work for office use, not as much for residential, I think (& Class B can certainly be new build). In any case some of the most valuable and sought after office and residential projects are most definitely in renovated historic buildings – Buggyworks, for example – but these options are limited in Cbus, correct. Developers look for opportunity at wherever they can find it – at the high end or the more affordable end. And you can offer more affordability not with lower quality finishes, etc. but with more compact units – Stafford downtown, Battery B and 1055 Lofts in the SN. I believe there will be more affordable options in the near future. Too big of a market to ignore.

    #1095836

    InnerCore
    Participant

    Class A, B, & C categories are absolutely used for multifamily. Working in multifamily developer I’m looking at it all the time. Go to Reis, Axiometrics or any of the other large apartment data sites and if you sign up for their data you can sort by these classes. And building brand new Class B would be pretty hard. I guess if you went into a horrible area and built the cheapest product you could it could be Class B but that simply isn’t going to happen much because no bank is going to finance it. Unless your talking about Affordable housing which is a whole other ball game.

    I agree developers look for opportunity where they can find it. But the issue is that you can’t build a brand new 105 year old building. For that reason developers can only build to the top of the market or build affordable housing which is subsidized. There isn’t much middle ground. The middle ground comes in the form of location. They can purchase more expensive land in the urban areas or less expensive land in the suburban areas. But in both cases they are building to the top of those locations.

    As far as the building smaller units I only slightly agree. In places where land and space in the urban areas is limited building smaller can get you cheaper pricing. But in general just building smaller units is more of marketing trick in locations that aren’t as constrained. The biggest cost to building are going to be the land and construction costs. So unless you are squeezing a lot more units on the same amount of land then it’s not that big of a savings. On the construction side the biggest costs are in the kitchens and bathrooms. Reducing the empty space of a unit is not going to save much.

    So for example lets say you have a piece of land that you bought for $5M and you are going to do 100 units. Thats $50k a unit in land cost. Now lets say it cost you $250/SF all in to build the units. So if you have on average 1,000 SF unit (blended of studios, 1 and 2 bedrooms) then its going to cost the developer $250k in construction cost and $50k a unit in land for a total of $300k per unit. At a 6% cap you would need to rent the units at $1,500.

    Now by making the units smaller the cost per square foot is going to go us slightly. You still have to pay for the same appliances, fixtures, same parking, same pools, workout equipment, etc but now for a smaller space. So let’s say you get the average unit size down to 800 SF and the cost per square foot is $300. That means that now you can build the units for $240k instead of $250k. And you still have the same $50k per unit is land cost so the total unit cost is $290k instead of $300k. So now at a 6% cap you would need to rent the $290k units for $1,450.

    As you can see not much movement. However if you were doing smaller units and therefore were going to the city and getting the right to build more units to where now you’re building 200 units on the same $5M piece of land that would cut the land cost per unit from $50k to $25k. So now you’re building units for $265k can and at the same 6% cap you could rent at $1,325.

    #1099332

    News
    Participant

    Columbus Ranked 10th Best Market to Own Rental Property in the US
    October 28, 2015 10:22 am – Walker Evans

    If you’re interested in becoming a landlord, then Columbus is one of the top places in the country to get started. A new report from All Property Management (the largest online network of property management companies in the US) revealed that Columbus is the top market for rental property owners in the Midwest region, and tenth best overall in the country.

    READ MORE: http://www.columbusunderground.com/columbus-ranked-10th-best-market-to-own-rental-property-in-the-us

    #1099392

    UrbanPlanner2112
    Participant

    It’s the neighborhoods that are expensive, not the apartments. If you wanted to live off of Morse Road you could find lots of very affordable apartments. If you want to live downtown, you’ll pay twice as much for the same space.

    If the apartments were too expensive then the occupancy rates would be low, and if you look where the high-priced apts are, the occupancy rates are pretty high.

    What you are technically seeing is the phenomenon of higher-income people increasingly seeking apartment living. They, of course, want fancier apartments, that in turn cost more.

    #1099482

    GViewProgrammer
    Participant

    I have a feeling that part of this is driven by young people. They have no concept of “Market Rate” and typically live on campus, probably the only place with more ridiculous prices than downtown. This taints their concept on price and convinces them that it is worth it to pay higher rents. Then when they graduate and move into the neighborhoods the sticker shock doesn’t happen. They probably started off renting their campus apt for over 1k vs mine were more like 500. So I could see them paying 1500 for an apartment whereas I would think that stuff is nuts.

    #1099488

    aculbie
    Participant

    As someone who just graduated from OSU less than 2 years ago, I really disagree with this. In fact, the situation is almost the complete opposite. Yes, the rents of many of the houses on campus are well over 1K, but that rent is typically split among 3, 4 or, in my case, 5 roommates, so I never actually paid more than $375/mo anywhere I lived. Now, I want to be able to have the luxury of walking to work (I work in the arena district) and not having to drive very often, but looking at the prices I would have to pay is, well, lets just say the sticker shock is real.

Viewing 15 posts - 106 through 120 (of 150 total)

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