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May 26, 2008 - 7:13PM
Best time in years to be a renter
Misty Williams, Tribune
The Valley's average apartment rent hit a record high recently, but experts say it's still the best time in years to be a renter.
That's because landlords are being forced to compete with thousands of vacant single-family houses put up for rent by frustrated home sellers.
Valleywide, 67 percent of landlords offered some sort of special deal to lure renters in the first three months of 2008.
That's up from 55 percent a year ago, according to a report by Pete TeKampe with commercial real estate brokerage Marcus & Millichap.
"Compared to the last two years, this is a great time to be a renter," said TeKampe, vice president of investments for the firm.
Failed condominium conversion projects have also added to the excess supply of rentals as investors returned thousands of units to the rental pool.
The Valley's average apartment vacancy rate rose to 11.5 percent - a record high - in the first quarter 2008, up from 9.6 percent a year ago, TeKampe said.
The average rent also reached a record high of $777 during the same period, but rent growth has slowed dramatically in the past year.
"There's just so many rooftops for people to live under," said Greg Thielen, associate partner with Hendricks & Partners.
If given the choice, people are likely going to opt for a rental house with a backyard, Thielen said.
The loss in rental income has left some apartment owners hurting.
Investors bought properties based on projected rents that never materialized, he said. And some investors are starting to miss payments to their banks, Thielen said.
"Lending's gotten more difficult, as well," he said. "In the past, they've been able to refinance to get help."
The state's new employer sanctions law has also hurt some apartment operators.
Many landlords were impacted in December, when tenants left before the law went into effect, Thielen said.
The vacancy rate in one area near 29th Street and Greenway Road jumped from 7 percent to 22 percent in a year, said TeKampe.
"That's an area that just got absolutely devastated," he said.
Thielen said he's heard of some buildings that are up to 30 percent vacant. It's difficult to know if the growing vacancies are just related to immigration reform or also job losses in certain industries, such as construction, he said.
The rental market will begin to strengthen when the inventory of excess homes disappears, Thielen added.
In the meantime, there are deals to be had for renters.
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