Lots of supply: But where's apartment demand?
If you build it, will they come? That's been the question on the minds of apartment developers hoping that the market can support the glut of new local units.
Judging from Norcross Station, the most recent rental addition, the answer is yes. But are all complexes doing as well?
"We're at nearly 100 percent occupancy for phase one," says Ann Marie Gathwright, leasing manager for Norcross– which took its first tenants in May, charging about $1000 for one bedroom and up to $1500 for two.
Phase one, the triangle-shaped warehouse building on Fourth Street just two blocks from the Downtown Mall, is unlike typical new apartment complexes [see cover story]. The 32 units feature original 1920s hardwood floors complete with marks from the days when the building served an industrial purpose.
Exposed brick and ceramic block, and stainless steel appliances in every kitchen give the spaces an industrial aesthetic that Gathwright says many tenants have found attractive. Even the apartment's strange shapes (thanks to the building hugging the CSX train tracks) offer a quirkiness not found in the polished right angles of new construction.
For folks looking for something a bit more traditional, Gathwright says Norcross Station's phase two, a new 32-unit building just south of the warehouse, may fit the bill though she couldn't comment on its success since leasing had just begun in late July.
Rip Cathcart, developer of Lakeside apartments on Avon Street Extended and Carriage Hill, says that like Norcross, his units are moving well– but he feels lucky.
"Our complexes are holding up," says Cathcart. "My impression of the market was there was a lot of vacancy and that projects had not reached stabilized occupancy."
Lakeside, however, is a "shining star," says Cathcart, at 100 percent occupancy. Carriage Hill is currently 90 percent full.
Cathcart says brand new apartment complexes– like Jefferson Ridge and Stoney Creek– may be facing difficulties because "even though they have the advantage of being new, they have so many units to fill."
Richard Spurzem, developer of Jefferson Ridge, confirms that times have been tough.
"We're at half occupancy," he reports. And though he says "every day the phone rings" with potential tenants, he believes even rougher times could be ahead for all apartment developments.
"We're in a soft market," says Spurzem. "What's interesting from a real estate standpoint," he adds, "is no one thought there was any softness possible."
And while new complexes have many units to fill, older complexes have their work cut out for them as well. In fact, says Spurzem, ever-increasing competition and the still-strong buyers' market are spawning a trend.
"What you see in hot real estate markets is conversion of apartments into condos," he says. He cites developer Hunter Craig's recent purchase of Hessian Hills, a 184-unit apartment complex on Georgetown Road, as an example of this conversion. Turtle Creek on Commonwealth Drive, he says, is also increasingly converting apartments to condos.
The effect, Spurzem hopes, will eventually be positive for rental units because ultimately "that will take units off the rental market." Though it may initially reduce the number of possible tenants (since current renters are the typical buyers, he says) conversions will eventually reduce the pool of available apartments.
But Chuck Rotgin of Great Eastern Management, owner of both Westgate and Barclay Place apartments, says the future looks bright at his older complexes.
"We're probably a little better this year than last," says Rotgin, citing renovations at the two complexes over the past few years. Also, he says, much of the new apartment construction is "student oriented"– not the market for either Barclay Place or Westgate.
With Coran Capshaw's 225-unit Fifeville development, Walker Square, getting ready to open this fall, apartment developers can only wait to see how saturated the market gets.
Spurzem, for one, fears things could get worse.
"We're not sure we've found the bottom yet," he says, "and not sure once we find the bottom how long we'll be scraping along before things improve."
Norcross Station, phase one, between Garrett and Market streets, is almost fully occupied.
PHOTO BY JEN FARIELLO
Norcross Station, phase two, is nearing the end of construction work.