The '80s: a decade that won't go away: survey data from residents of communities built in the 1980s in four key Sun Belt markets help show why development here is back in vogue.

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Well-dressed apartment executives in their 30s and 40s probably cannot help but smile when they see the modest revival of such fashion trends as leggings, yuppie alligator-logo golf shirts, patent-leather shoes and men's blazers with scrunched-up sleeves. These looks bring them back to the 1980s and their days spent in high school, in college and as young professionals.

But fashion isn't the only industry enjoying a 1980s comeback. A similar re-awakening is underway for the large number of apartment communities built during that decade. Understanding residents' characteristics and meeting their needs can make these communities attractive to potential residents and investors.

Owners don't need to invest in retro-1980s interior design trends, though, to attract residents. There is no need to repaint apartment units in mauve or dusty blue, install dark tan carpeting and renovate kitchens with brass knobs, oak-stripped cabinets and Formica counters. Don't insist on assembling Scandinavian wood shelving systems in a model's living room. And dusting off 1980s relics such as front-yard flamingos or installing Pac-Man video games in the community rooms isn't the ticket, either.

M/PF Yieldstar's Vice President of Research and Analysis Greg Willett, considered one of the most respected apartment demographic Talking Heads, to borrow the name of a popular 1980s band, shared his knowledge on data and demographics for this niche market (See tables, pages 54-55).

In his session given at the 2007 NAA Education Conference & Exposition in Las Vegas in June, Willett presented results from a survey taken in late 2006 of residents in mostly B-class communities built in the 1980s in four key markets in the nation's Sun Belt: Charlotte, N.C.; Houston; Dallas; and Atlanta.

Another Brick in the Wall

The 1980s' apartment construction boom certainly epitomizes this period known as the "Decade of Excess." Willett said the glut of apartment product built in that era was spurred significantly by out-of-control savings and loan associations. Subsequently, the Sun Belt was flooded with new supply.

"With banks giving loans to anyone who could breathe in the '80s, this was the most active period for apartment construction--ever," Willett said. More than two decades later, these communities still comprise the largest product segment in many markets, he said.

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Dallas is among the most extreme examples; about 35 percent of the metro area's stock is from the 1980s. Shares range from 26 percent to 27 percent in Atlanta, Charlotte and Houston.

During market softening, performances in the B-class sector usually hold up a little better during the first stages of a downturn than the A product.

"But once impacted, B communities usually can't gain traction until the A product recovers," Willett said, "Class-A communities then raise rents to levels that push more renters down into B stock that is of more moderate quality."

The Gap Band

The initial stages of recovery show gaps between A's and B's occupancy rates. Then, those gaps narrow as B communities catch up to A communities. Willet said M/PF is excited about the next couple of years for the B market and said he "expects significant rent growth to come."

The 1980s-era communities' occupancy performances in most Sun Belt markets during 2002-2005 held back, but then showed momentum in 2006 and early 2007, Wilier said. "Some notable rent growth appears on the way, especially in neighborhoods that now have become built-out," he said. And although the Sun Belt rental market as a whole has grown, individual local markets within the Belt have shown varying degrees of growth, he said.

Occupancy recovery in Charlotte's 1980s-era stock is complete, Willett said, "putting it furthest along in the recovery among Charlotte, Dallas, Atlanta and Houston." Annual rent growth for Charlotte, he said, is around 6 percent.

In Dallas, the gap created between the 1980s and 1990s properties is shrinking, with annual rent growth at approximately 2 percent. Atlanta's annual rent growth is set at approximately 2 percent as well. Atlanta's occupancy for 1980s-era units remains a bit lower than the 1990s-vintage performance. "In the past year or so, the gap is even slightly moving apart again in Atlanta," Willett said. "Whether that is a one-time thing or a trend, we're not sure."

Houston's occupancy in 1980s properties should regroup after the loss of hurricane evacuees is complete, Wilier said. "As the [flight] of these evacuees from these B communities is coming to an end, Houston will now be able to close the gap," he said. Right now, annual rent growth in Houston is flat, but should improve.

Who Can It Be Now?

M/PF's survey data show comparisons based on age, income, nationality and amenities, among other criteria. Some assumptions on the characteristics of the resident base in the 1980s-era stock are true, Willett said. But others, he said, probably aren't accurate. Age, race and economic levels can help to determine the true characteristics of a 1980s community resident.

So who's living here?

"You won't find may Generation Y growth in these '80s communities," Willett said. The average renter is about 40 years old and an overwhelming majority (56 percent) is 35 years or older, he said. The Dallas 1980s market is especially void of Generation Y renters; 64 percent of renters surveyed were 35 years or older.

Nabbing more Generation Y renters takes the right amenities, Willett said, but not necessarily concessions.

"Getting perceived value rated high in all groups, but Generation Y didn't equate value with getting a discount or concessions," he said. "The apartment industry hasn't trained Generation Y to ask for concessions."

Among desired amenities, the pool gets heavy use, "so make sure that area is in good shape," Willett said. Fitness centers scored well for those ages 25 to 34 years. "As we see it, if you are younger than 25, you don't need a fitness center and if you are over 34, you've given up," Willett said.

As for communities that set aside areas for residents to wash their cars, "they were not common in the 1980s, but those with them scored very high," Wilier said.

Well-planned upgrades can also help to attract Generation Y members to 1980s communities. Although there is not a one-size-fits-all upgrade with mass appeal, new kitchen appliances scored well with residents under age 30, Willett said.

The 1980s were not especially known for technology, yet those who were born in that decade have grown accustomed to--and demand--it. Most 1980s-generation communities, however, do not yet provide high-speed Internet access. According to the survey, only 34 percent of these communities offer it. The Dallas market ranked highest at 41 percent.

"Maybe this is why you don't see many young residents here," Willett said. "Just try to rent an apartment to someone under 25 without offering high-speed Internet access--you can't do it."

Willett said M/PF's follow-up survey question to whether the community offered high-speed Internet access or not was, "Does your community offer Wi-Fi?" The most popular answer was, "What's Wi-Fi?"

We Are The World

Race is another factor that helps to determine who lives in these 1980s communities. Living arrangements, location, income and amenity choice differ slightly from one ethnicity to another, and determining who is living in these buildings can help owners decide how to market their communities.

Most 1980s' community residents live alone. "This reflects the nature of the 1980s' product, which was overwhelmingly one-bedroom construction," Willett said. This construction, however, is not necessarily conducive to living-arrangement preferences of all races. Household sizes for families of Asian or Hispanic descent, and those who identified themselves as multicultural (defined as a single person of mixed ethnicity or a two-person household with each person from a different race), is larger than those of Caucasian or African-American families.

The location of the community is also important. A move within the same neighborhood is most common according to respondents, and the propensity to stay in the same neighborhood when moving is particularly high among Hispanics, according to the survey.

Finding that next apartment, whether in the same city or in a different state, begins mostly with driving around or talking to friends and family, the survey showed.

Referrals are far less common with Caucasians than with other groups. "Unlike all the other races in this survey, it seems whites don't get referrals from friends or family," Willett said.

Because Houston has a much larger share of Hispanic residents than the other three markets, its frequency of friend- and family-referrals is highest among the markets.

When it comes to community features, 83 percent of respondents in Houston's 1980s-vintage developments said security is among the most important. Atlanta followed at 68 percent, then Dallas (63 percent) and Charlotte (58 percent).

"But this is not unusual," Willett said, "considering that this survey was conducted in late 2006 when there were a lot of reports in the media about how Hurricane Katrina evacuees were causing crime where they relocated."

Race, too, determines how important security is as an apartment community feature. "African-Americans and Hispanics score security features notably higher than do other ethnic groups," Willett said. "Also, in general, the older the renter, the greater their concern is about security features."

Property security gates are standard in Houston's 1980s-era stock--95 percent had them--but are rare in Charlotte, where just 2 percent had them.

Work Hard for the Money

Income no doubt plays a large part in the apartment selection process. The share of income spent on rent by Asian households is lower at 18 percent, compared to that of other nationalities. This reflects Asians' larger typical household income of $53,000.

Modest incomes make these households renters by necessity. In Atlanta, 31 percent earned $50,000 to $74,000. Charlotte was a distant second at 22 percent, followed by Houston and Dallas, both at 18 percent. The average overall was 20 percent. Atlanta's renters scored highest, making $75,000 or more--50 percent higher than the survey's average.

The share of income spent on rent doesn't vary much among the four markets at 20 percent or 21 percent.

Because personal income is generally lower at a younger age, those residents aged 25 years or younger spent the largest share of income on rent, at an average of 24 percent.

General value rates as the most important factor when selecting an apartment. "Proximity to work ranked high in Atlanta (79 percent, 10 points above the survey average); if you've ever driven around Atlanta, you'd know why," Willett said.

Despite commutes and location, many of the residents in 1980s product are long-term residents of their respective metro areas. In contrast, for 31 percent under 25 years old, the length of residence in the metro area is less than a year.

"Houston and Dallas residents tend more to be from the same neighborhood," Willett said. Charlotte and Atlanta residents moved from within the same markets or from outside the markets, he said.

Most surveyed residents in all markets moved from one apartment to another as opposed to from a single-family home to an apartment. However, given that the average age of these residents is 40 years, the residents tended to have some experience with homeownership, Willett said.

The survey included a final, all-encompassing question, asking residents to evaluate the overall performance of their respective management companies. Willett said data show that "generally speaking, the industry is doing a good job." *

Paul R. Bergeron III is NAA's Director of Communications. He can be reached at 703/797-0606 or paul @naahq.org. A CD that includes audio recordings of this and all other 2007 NAA Education Conference & Exposition sessions is available at www.naahq.org/conf.

Where They Live

                                     Percent
                                    Residents
Atlanta Locations                   in Survey

Perimeter Cobb County                  42
Gwinnett County                        24
GA400 Corridor                         17
1-85 Corridor/West DeKalb County       11
College Park                            6

                                     Percent
                                    Residents
Houston Locations                   in Survey

Katy/SW Houston                        39
Champions                              34
Clear Lake                             15
North Central Houston                   7
NE Houston                              5

                                     Percent
                                    Residents
Charlotte Locations                 in Survey

South Boulevard/Park Road              44
East Charlotte                         26
22 Highway                             74
WT Harris Boulevard Corridor            8

                                     Percent
                                    Residents
Dallas Locations                    in Survey

Far North Dallas/Carrollton            28
Irving                                 24
Garland/Mesquite                       18
Highlands/Far NE Dallas                15
Duncanville/Grand Prairie              15

Source: M/PF Yieldstar

Search Method

                         Total   Atlanta   Charlotte   Houston   Dallas

Drive-By or Visit         32       30         28         29        38
Referral From Family/
  Friend                  22       16         20         32        19
Internet                  17       23         23          9        16
Apartment Publication     16       18         24         12        12
Other                     13       13          5         18        15

Source: M/PF Yieldstar

Amenity Preferences

Amenities Used
Frequently               Total   Atlanta   Charlotte   Houston   Dallas

Swimming Pool             64       65         56         64        68
Fitness Center            44       50         40         41        42
Laundry Facility          33       24         32         44        33
Car Wash Area             29       42         19         29        20

Source: M/PF Yieldstar

Desired Upgrades

Preferred Upgrade        Total   Atlanta   Charlotte   Houston   Dallas

General Interior
  (Flooring, Walls)       31       27         24         35        37
Kitchen Appliances        23       21         29         22        23
Kitchen Counters,
Cabinets                  22       22         25         23        18
Bath Fixtures,
  Counters, Cabinets      17       21         16         13        15
Exterior Paint,
  Landscaping              7       10          5          7        6

Source: M/PF Yieldstar