Crowded heights: New apartments ritzy or risky?
Luxury apartment complexes are popping up like May flowers, and one local firm has already unveiled a big gun– an off-site rental office– to keep business blooming.
Since 2002, six upper-end complexes close to 1,300 units have been planned, built, or are under construction. That's more units in one year than in the previous 12. What's going on?
"This is a good area," says Gregory Godfrey of Godfrey Property Management Corp. "A lot of people want to live here."
While Godfrey says his company, which focuses on single-family residential houses, has little to fear from a possible glut in the high-end market, others say that vacancy rates are already climbing, and developers are gearing up for battle.
One of the boldest marketing moves comes from Atlanta-based developer Nathan Metzger and his developing partner, Dave Matthews Band manager Coran Capshaw. In a spot better known for restaurants and theaters, the duo just opened a flashy rental office for two of their complexes. It's on the Downtown Mall.
Though neither Metzger nor Capshaw returned The Hook's calls by press time, property managers interviewed by The Hook can't recall another such ambitious off-site method of attracting residents.
Fellow developer Richard Spurzem thinks the Mall-front office is a good idea for promoting Capshaw's complexes, Riverbend Apartments on Pantops and Walker Square in Fifeville. "Riverbend is behind a shopping center, so you can't find it, and Fifeville isn't built yet," explains Spurzem, who notes that a Mall-front office might not have been necessary just two or three years ago.
Spurzem is the force behind Jefferson Ridge, a luxury apartment complex currently under construction near the Redfields subdivision off Fifth Street Ext.
Spurzem says the high-end apartment frenzy started back around 1994 when developer Rip Cathcart leased all 148 units of Phase I of Lakeside apartments on Avon Street Extended– six months before opening day. Phase II of Lakeside had similar success, Cathcart says.
The response to Lakeside, says Spurzem, offered proof "that people were willing to live south of town."
When Cathcart built Carriage Hill on Pantops Mountain, behind the Rivanna Ridge shopping center, he stirred a budding tempest. Cathcart says vacancies in high-end complex dipped below a percentage point, while rents began soaring over the $1,000-a-month mark comparable to rents in cities like Austin and Atlanta.
"Little sirens went off at developers all over the country," Spurzem says. "Every major apartment developer in the country," continues Spurzem, came to town to build a luxury complex. But he says they couldn't find the land a fact that led some out-of-towners to join forces with local developers.
Atlanta-based Metzger developed plans for the Riverbend complex on land behind the Pantops Shopping Center where Capshaw had originally hoped to put an amphitheater. Their second project, Walker Square, slated for completion later this year, lies on Capshaw land in the Fifeville neighborhood next to Union Station.
Cathcart agrees that filling the new complexes may not be as easy as developers thought when they first put their plans on the page.
"Nobody would deny we're going to be in an overbuilt situation here," he says.
Cathcart says he is in a position to feel the softening of the market on a day-to-day basis as he and his property management company attempt to fill Phase II of Carriage Hill. "We're at about 80 percent occupancy," he reports.
Though he believes there is enough demand to fill his upscale units, the larger of which come with direct access two-car garages, his business plan has changed.
"We're taking the show on the road," he says. Until he and his partner, his brother David, see how the market absorbs all the apartments under construction now and those in the planning stages, Cathcart Properties Inc. won't undertake any new projects locally. Instead, Cathcart says they'll look to other cities in Virginia and in neighboring states.
As for how the glut of high-end digs will affect less ritzy developments, both Cathcart and Spurzem say that while vacancy rates may increase across the board, the news is good for renters. With supply outpacing demand, rents won't increase as rapidly as they have in the past.
Spurzem also believes there's still demand for the new complexes but how much remains to be seen. As each project is completed over the next year, he says, "We'll find out once and for all how deep the market is."