Scrambling for renters The extra mile: Apartment managers are offering more services in a bid to attract and retain tenants.

October 29, 1995|By Adele Evans | Adele Evans,SPECIAL TO THE SUN

When Elaine Chinn attended a recent apartment conference in Orlando, service was considered so critical that Disney officials were invited to teach lessons.

"They're always smiling, and the parks are spotless," Ms. Chinn said. "We have to live up to our renters' expectations."

Ms. Chinn, director of marketing at Community Realty Co. Inc., which manages 13 apartment communities in the Baltimore area totaling 6,500 units, says that to compete these days, her company has to offer more than a good floor plan. Services range from offering community pavilions, aerobics, karate, spas, courtesy vans and fax machines.

Community Realty isn't alone. The Time Group, which manages about 20 properties in the area, rents videos at some of its properties and may consider day care in the future.

Hit hard by the recession, changes in tax and banking laws, and falling interest rates -- apartment managers are scrambling to attract and retain renters. Nationwide, the average length of stay is a year and a half. To increase that length as well as attract new renters, managers feel that going the extra mile is essential.

"Our customers are expecting more," Ms. Chinn said. "They want all this. They don't want to spend $100 a month at a gym."

"The pie is smaller and everyone wants a piece," said P. J. Widerman, president of the Apartment Builders and Owners Council of the Home Builders Association of Maryland, which represents 156 members and 130,000 rental units. "The renter is more demanding of quality for the money they pay. They shop and compare. The dollar is precious and they want the best value."

Apartment officials didn't always have to scramble so hard. During the real estate boom of the 1980s, apartment developments geared for the 80-million baby-boomer market flew up as fast as developers could build them.

"They were overbuilt in the '70s and '80s, but we were able to fill them," said Jeff Matthai, president of JFM Marketing Associates Inc. of Sparks, which promotes several communities across the state. "The markets changed and tax shelters fell away in the mid-'80s. It discouraged builders and you saw vacancies."

In the early '90s, the bottom dropped out of interest rates and home-buying soared. Great for buyers, but not for apartment owners, whose vacancy rates rose to the 6 percent to 10 percent range (when 5 percent is the absolute highest vacancy acceptable).

"Rents were maintained, if you were lucky," said John Martonick, vice president and treasurer of the Home Builders Association. "All through 1993 and 1994, it was impossible to do significant rent increases."

As rents flattened, building and health regulations and insurance costs all kept rising -- an increasingly expensive burden to the industry.

"We're hit with everything," said Ms. Widerman, who is also vice president of Partners Management Co., which manages 5,000 units. "It's a constant battle."

"Lead programs are so far beyond the intent of the law our members estimate it would take $15,000 to $20,000 an apartment to meet the regulations. That's $20 million for 100 units," Mr. Martonick said. "Where will you find it?"

Other examples he pointed to included a movement for increased funding of apartment inspectors in Baltimore County. Even at $10 a unit, it's a huge amount of money, Mr. Martonick said. In Harford County, he knows a builder who is being required to pay the county $8,500 per unit for a water hookup.

The economic climate launched the give-away market. While rents froze, concessions of up to two months' free rent became common, security deposits vanished, discounts appeared on one-year leases, and vacations, free televisions and other perks emerged. Area rents, which increase 5 percent to 7 percent in a good year, froze and have remained flat.

Although the concessions and perks saved many managers from bankruptcy, many others couldn't survive, closed their doors, and projects were sold at auction.

Turning a corner

Last year, the industry began to turn a corner as interest rates began to creep up once again -- but the struggle is far from over. Market projections vary from cautiously optimistic to bleak -- and are hinged on the general economic and employment trends.

"There are many outside factors that determine any market. I don't see prospects as very good," Mr. Martonick said.

"It depends on the type of clientele," Ms. Widerman said. "Because the economy hits lower-income folks first, at entry-level jobs, they lack the financial resources if they lose their jobs -- like having savings for two to three months' rent. They move back home or in with other people."

"There's still insecurity, especially in Maryland with all the layoffs," Mr. Matthai said.

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