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Financial pressures coupled with rampant unemployment have increased the demand for rental properties.
According to GlobeSt.com, a commercial real estate and property resource, as more Americans are unable to meet mortgage financing requirements, the trend is toward renting, which pushes occupancy rates higher.
The Rochester rental market echoes this trend. The apartment market here is stable and strong, says Christine Giuliano, property manager and part owner of Flower City Management Corp., whose rental properties include the Medical Arts Building on Alexander Street, Chapel Hill Apartments on Prince Street and other locations in the Park Avenue neighborhood.
Carol Pospula, who works in leasing and tenant relations at Buckingham Properties LLC, says she noticed more stability in the local market last winter than usual. Normally at that time of year the market is slow, because most people do not enjoy moving during the winter. But the mild winter resulted in more people moving, Pospula suggests.
Buckingham Properties has Buckingham Commons at 85 Allen St., lofts in the Michaels-Stern Building on Pleasant Street, Water Street Commons on Water Street and the Daily Record Building.
Rich Calabrese, owner of RentRochester.com, a website where owners list properties, also says Rochester's rental market has been stronger in the last year or two.
"Rochester has historically had one of the most steady residential real estate markets nationwide," Calabrese says. "We don't have the huge ups and downs as larger markets, and that's what keeps us stable."
Though low interest rates could entice potential homeowners, owners of rental properties are unfazed. In her experience, Giuliano has discovered that there will always be a market for people who would rather rent than buy. Add to it an uncertain economy and the pool of renters increases.
With a home being one of the largest investments an individual makes, Guilano says tough economic times could hinder this move since it requires a higher level of commitment that could be risky for most.
Flower City Management's apartment occupancy rate tops 99 percent. Depending on the type of property, monthly rents range from $500 for a moderately priced apartment on Park Avenue to $2,000 for a newly renovated, high-end apartment at 277 Alexander St.
The occupancy rate nationally, at 93.4 percent for the third quarter this year, is as high as it has ever been, according to industry news source Realty Times. The rate was 92.6 during the last peak of the market, the third quarter of 2008.
Location does play a role in rental prices, and with new construction and more options to live downtown, landlords are getting competitive.
"Landlords are upping their game to include many more amenities than in the past," Pospula says. "Also they offer more 'specials' to attract renters, such as allowing larger-breed pets and free rent incentives."
Nationally, in the third quarter of 2011, the average rent was $994 a month, compared with the peak market rent of $997 in the third quarter of 2008, according to RealFacts, an apartment industry research and analysis firm.
Some five years ago, rental rates fell slightly as homebuying became more popular. Buyers were everywhere, Calabrese recalls. Although the interest rates are still at a record low, some renters have postponed the purchase of a house.
Calabrese says the homebuying market is not as much of a factor as in the past, since houses are staying on the market longer. Some potential buyers are sticking with apartments as it gets tougher to qualify for a mortgage. With fewer able to buy a home, Calabrese expects rents will continue to climb.
Officials at Home Properties Inc., which owns apartment communities, have observed that though interest rates are low, the prices of homes are still relatively high.
"It is still expensive for people to own a home and is difficult for many to qualify for mortgages," says Charis Warshof, vice president of investor relations at Home Properties. "Banks are more stringent in their lending practices now than in the days of the subprime mortgages."
With fewer tenants of Home Properties able to purchase a home, the company has the highest resident retention among the 12 publicly traded apartment real estate investment trusts, she says.
"When residents stay with us, it reduces the costs we would have when residents move out-e.g., painting, cleaning or replacing carpets and advertising for new residents," Warshof says.
According to the National Association of Real Estate Investment Trusts, as a result of improved demand, low supply growth and cheap debt, the 2012 outlook for the apartment market is positive.
Affordability is the main focus right now, and depending on what a renter views as expensive rent, it will play a part in the homebuying decision, Calabrese says.
Landlords that have good relationships with tenants and work to meet their needs also will increase residents' satisfaction and desire to remain renters, Giuliano says.
"I recently rented an apartment to a former tenant who was delightfully surprised that we hadn't increased rents for the majority of our apartments," she says. "We are sensitive to the fact that people have a budget and want to reside in an apartment that is in good condition in a safe area."
Crystal Gulian is a Rochester-area freelance writer.4/20/12 (c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email email@example.com.