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Apartment living 2000.

Although real estate is inherently an unpredictable business, one certainty is that people will always need a place to live. And while the American Dream of a single-family home is still the ideal for some, there are millions of people who, for a variety of reasons, choose to live in rental apartments.

At the same time, the challenge for luxury apartment owners, managers, and developers is becoming much greater. The pool of renters is unquestionably shrinking as the baby boomers reach middle age, start families, and move into their own homes.

As a result, nationwide demand for apartments during the 1990s is expected to remain flat. Not until the early 21st century, when many of the boomers hit retirement age and their children are seeking independence, jobs, and their own apartments, will demand increase significantly.

"By then, the population as a whole will be younger," says Regis Sheehan, an economist with the National Apartment Association. "And because 85 percent of all households under the age of 25 are renters, the new decade will see a surge in demand."

Sheehan notes there will be a projected 1.1 to 1.2 million new household formations in the 1990s, compared with 1.3 million in the 1980s, and 1.7 million in the 1970s. In the first decade of the next century, however, the children born in the late 1970s and early '80s are expected to create from 1.3 to 1A million new households. But population does not tell the whole story.

"In general, the apartment market is fueled by first-time renter demand from adults 19 to 25," observes Dr. John Kokus, director of the Real Estate Center at American University in Washington, D.C. "But raw demand only translates into effective demand through the money in people's pockets. The strength of a local apartment market is directly correlated with the job opportunities for young people in their 20s and the economic stability of that area that jobs provide."

In other words, all those people are going to need jobs that pay enough to support a modest apartment and an independent lifestyle.

Current economic problems are reflected in apartment demand. According to Dallas-based M/PF Research in its 1992 U.S. Market Scan Report, new household formation has declined as renters double up, delay leaving their parents' homes, or buy houses to take advantage of distressed prices and low mortgage rates.

In fact, the U.S. Census Bureau reports that 53 percent of all young adults 18 to 24 lived with their parents in 1990, compared with 47 percent in 1970. For adults 25 to 34, that figure was 12 percent in 1990, and 8 percent in 1970. If the national economy in 2007 is anything like it is in 1992, apartment developers "will be jumping out the window," one observer quipped.

However, other groups may help to lessen the impact of the decline in the young adult population. As the segment of the population over 55 continues to grow, more older adults may opt for smaller quarters with few maintenance requirements. Rental apartments may be the bridge between the family home and various forms of senior housing.

In addition, households of singles of all ages, single parents, and other non-traditional "families" are expected to increase in number over the next 15 years, according to demographers. "These tend to be smaller and don't need or can't afford traditional single-family housing," says Nina Gruen, principal sociologist with Gruen Gruen + Associates in San Francisco.

Locating demand

If current migration patterns remain consistent, the hottest areas over the next 15 years for new multifamily development will be the Sunbelt and the Far West. According to Housing in America: 1970-2000, a 1991 report issued by Harvard University's Joint Center for Housing Studies, more than 90 percent of the population growth and 70 percent of the household growth in the United States during the 1970s and '80s took place in the South and West, although those areas contained only about 50 percent of the population.

The report cites a University of North Carolina study that attributes this appeal to a broad variety of essentially non-economic factors:

* A growing, footloose, sun-seeking retirement population that has private pensions, social security checks, and other sources of income not tied to a place of work.

* The spread of central air conditioning, which allows more comfortable summertime living and working.

* Lifestyles that are more oriented toward recreation and year-round outdoor activities.

* Changing racial attitudes that permit African-Americans and Hispanics new opportunities to participate in the economic and social institutions of the South.

* A dramatic improvement in the quantity and quality of the region's consumer services, financed by rising personal income levels.

* Yet the Harvard report expects much lower levels of "Frostbelt to Sunbelt" migration during the 1990s, as compared to the peak 1975-1985 period, for three reasons:

* An older baby boom generation will be entering the stages of their lives when job stability and family ties lower their rates of interstate migration.

* Service jobs, which now constitute major sources of employment in the Northeast and Midwest, are mostly tied to local markets and allow less relocation than the manufacturing jobs they replaced.

* The strong wage advantage for business location and relocation that attracted many firms to the South in the 1970s and '80s has largely disappeared.

"Location," of course, also refers to the spot where apartments are situated within a geographic area. Experts predict that areas just outside the downtown area of major cities, which are readily accessible to work, shopping, and neighborhood services, will continue to be the most favored choices.

Much to the chagrin of urban planners and politicians, demographers do not predict another "back to down-town" movement, which spawned much of the gentrification of many older cities in the 1970s and 1980s.

And much of the new multifamily development will not be in traditional places, according to Gruen. She sees a continued trend toward blending retail, office, and residential development within one property.

"This makes sense for working and shopping and from every other kind of perspective," Gruen says. "If you have a job near the area and you don't have a traditional family, it sure is a lot easier if you're not spending all of your time commuting."

One of the newest trends in land-use planning is the addition of residential units to large office/industrial parks. The movement is already underway in California, spurred by the combination of a laggard office market and concerns over ever increasing commuting times, the shortage of affordable housing, and the environment.

At Hacienda Business Park, an 876-acre, mixed-use complex in Pleasanton, Calif., a portion of the property has already been zoned for residential use. Since the park opened in 1983, only about 4 million of the planned 10 million square feet of office and industrial space has been built. In January 1992, the developers of the park, Prudential Realty Corporation, received the city's approval to rezone 9 percent of the complex, or 80 acres, from low-rise office to multifamily.

Robertson Homes, a national apartment developer, plans to purchase 27 acres and construct 878 one-to-three-bedroom rental units in garden apartment buildings. Construction is expected to have begun in 1992 with the final phase ready for occupancy in early 1994. The long-range plan for the remaining 52 acres calls for the development of for-sale townhomes at a density of 10 to 15 units per acre, condominiums, and single-family homes.

In a similar undertaking, Newport Beach, Calif.-based The Koll Company is considering requesting a rezoning for about 70 acres of its 130-acre Sierra Point Business Park in San Francisco. The master plan had called for 2 million square feet of office space, two hotels, and a 600-slip marina, but only 400,000 square feet of offices have been built.

Creating quality of life

The desire to live close to work is only one of many factors that will influence rental decisions in the 21st century. Many developers agree that the "futuristic" amenities and options of today will become the features of tomorrow.

Ten years ago, home offices were considered rather unusual. Yet in 1992, according to Home Office Computing, there are 32.4 million home "dedicated work spaces" (with or without a computer), and the magazine predicts this number will grow by 20 percent a year through the next decade.

For apartment owners and managers, this means many prospective renters now and in the future will be drawn to those properties designed with this need in mind, which can be anything from a separate room built for a home office, to a refurbished walk-in closet or other specially designed area.

Apartment home offices also will require increased electrical capacity for computers, copiers, and printers, additional telephone/fax lines, modem capabilities, and built-in surge protectors.

Some apartments are already addressing this need. Summit Properties, a Charlotte, N.C.-based national apartment developer and manager, is in a joint venture with ITT Corporation and several small Southern Bell companies in the Midwest. Some properties now have units pre-wired with a computerized telephone/cable TV/security/modem system, which is available to tenants at an additional charge. The firm plans to move the concept east as it modernizes its older properties. Jordon Clark, director of development for Atlanta-based Trammell Crow Residential, notes his firm is experimenting with an L-shaped, 8-foot-by-8-foot work area, partitioned from the rest of the apartment by a low-rise wall. "People are very glad to have a special area in their apartments designed for their home computer," says Clark. "You can do a tasteful, unmistakable work niche that is out of view of the bed or living room sofa."

Many developers acknowledge that apartments are increasingly replicating single-family homes in terms of built-in features and offered amenities. For example, full-sized washer/dryers are replacing "stacked" units, microwave ovens are gracing more and more kitchens, and manned and electronically monitored security systems are becoming a very sought-after plus, especially in urban or infill locations.

And the units themselves are getting bigger. In the 1970s and early '80s, developers targeted the young single, whose possessions and financial resources were limited and who preferred a studio or one-bedroom unit. In the 1990s, however, apartment "homes" are becoming larger, both in terms of square footage and number of rooms. This trend reflects the new housing needs of the growing segment of non-traditional families," including single adult roommates, mixed generations, and single adults with children.

Accordingly, the most popular size remains the two-bedroom/two-bath, followed by the two-bedroom/two-bath with swing room, which can serve as a den, nursery, playroom, or third bedroom.

Creating the sense of a more permanent home also extends to a new emphasis on service amenities.

"Services make the residents feel important," notes Charles Harty, CPM(R), president of Network Management Group, which provides such extra touches as cleaning residents' car windshields once a week and providing free coffee and donuts to commuters as they head off to work each morning.

Organized activities are another way managers are making their projects feel like home to their residents, observes David Picerne, CPM, president of the Phoenix-based Picerne Development Company.

"There was a time when clubhouses were out of vogue in some markets, but now there is a resurgence of clubhouses with activities rooms, media rooms, and well-equipped fitness rooms," Picerne says. "As developers make a commitment to building those amenities, they are also making a commitment to organize activities for the residents in order to take the most advantage of those facilities."

What's in store for tomorrow's luxury apartment renters? Based on today's diverse offerings, much more of the good life.

Child Care - Amenity


the Future

As the baby boomers of the 1950s and '60s become the parents of the '90s, child care has replaced fireplaces and track lighting as the amenity of choice. Busy families are finding the availability of child care in the workplace and in the apartment community a major draw. Recognizing the value of this amenity in a competitive market, two property managers have found innovative ways to add this in-demand feature to their properties.

A one-room fantasyland

"We were looking for a way to give something to the community and give some polish to our image in a soft market," says Rob Johnston, CPM(R), president and founder of Sovereign/South-Eastern in Atlanta. "We had a 400-unit property made up primarily of two-and three-bedroom units. That translated into a lot of children."

Johnston and his staff started small, installing a few tables and games into a room at the community's clubhouse. Parents from the property volunteered to take turns supervising the crafts, reading, and games about three days a week between 2:00 and 6:00 pm.

So successful was the initial program that, within a year, the project was expanded. With some creativity and a budget of about $5,000, Johnston and his team created a "Magic Castle" with brightly colored wan murals and plywood cut-outs of cartoon favorites. The property received donations of a TV and VCR so that movies could be added to the entertainment mix. A video library of cartoons and a library of children's books were also developed.

Within a year and a half, between 60 and 80 children were participating, under the direction of more than a dozen volunteers. The room is also rented out for residents' birthday parties and is used for seasonal children's events.

"Now the room is the first place we show prospects with children," reports Johnston. "The kids see the playroom and immediately ask their parents to move in."

But despite the program's success, plans are to keep its focus limited. "It isn't day care," insists Johnston. "We think of it more as a 'latch-key' program, where children whose parents work can have a supervised play area after school and on the weekends. We want to keep it on a volunteer basis."

Volunteers are coordinated by the property's activity director, and, in a few cases, committed volunteers are given small breaks in rent for extensive participation. The parents of all children who participate are asked to sign a waiver of liability, and activities are confined to the playroom itself. "We have not had one incident of liability in four years," says Johnston.

The play center is also a major retention tool. "Children develop such an affinity to their friends that parents are reluctant to leave," says Johnston. As proof of the program's success, Sovereign/SouthEastern has opened up playrooms at five different properties.

Once the playroom is completed, maintenance is minimal. "We spend less than $100 a month at most properties," says Johnston, "and it's usually the best-used amenity on site."

Making the old new

If on-site child care can enhance the success of a sound property, its value may be even more pronounced at a distressed one.

Sovereign/Hold & Hooker recently took over management of Avalon, a 450-unit property in Orlando that had recently been foreclosed for the second time. To turn the community around, the firm received ownership's approval to bring down occupancy to only 17 percent and begin an almost $3 million renovation. A new marketing plan was also developed, aimed at promoting the property to families with children.

"The property consisted of 69 percent two- and three-bedroom units," says Robert Hold, CPM, president of the firm, "and because few other properties in the area were targeting this market, we felt it would be ideal for Avalon."

The firms direction proved correct. As the property began to re-lease to residents with children, Hold and the property supervisor, Margaret Robbins, decided to move ahead with Phase II of the renovation - a conversion of one of the property's two clubhouses into a children's activities center.

"There was some method in our madness," admits Robbins. "We waited until we began bringing in better residents and then announced the new child center as a closing tool." As a result of this leasing strategy, about 65 to 70 percent of Avalon's residents have children.

The luxury of a second clubhouse a Avalon enabled Hold and designate spaces for many sorts of play. A large activities room is used for theatrical productions, parties, and informal "Mom support groups." A second rumpus room sports a "game board" carpet, with playing surfaces woven directly into the nap. A third room is devoted to crafts and hobbies including a "dress-up corner" stocked with costumes. Children may also use outdoor playgrounds under the supervision of a part-time activities director.

"We operate the program for three hours a day after school," says Robbins, "as well as full days during the summer months" To reduce potential liability, a parent of all participants is required to be on the property whenever children are at the play group.

"We also ask families to sign a waiver," says Bob Hold. "But the children, who range in age from five to twelve, are very well behaved, and we have had very few problems."

Although Hold and Robbins consider the childrens' activities primarily as an amenity, it has also had the added benefit of reducing general wear and tear by centering play in specified areas.

The bottom line result is 95-percent occupancy in a soft market. "I don't have a single two- or three-bedroom apartment available," says Robbins. "That is pretty rare in this market."

Apartment Managers 2000

All too often, an apartment manager must be part concierge, part orchestra leader, and in some cases, part magician.

"The manager's job is getting more and more challenging each day, demanding that the skills and training of the people involved be on a higher level," says David Low, president of NHP Property Management, a Reston, Va.-based national apartment management and ownership concern.

Institutional ownership of apartments is a primary reason for today's more stringent requirements. As a result of increased institutional ownership of residential properties, apartment management has become more sophisticated in terms of individual and property performance, financial accounting and reporting, and professional relationships.

"Property managers clearly are going to have to be focused on the residents and satisfying their needs and wants concerning lifestyle changes" says Tom Schuler, president of Insignia Management Group, Greenville, S.C. "But at the same time, they have to be able to communicate to the new, very sophisticated owner or asset manager who is overseeing the property management function, be able to relate to him or her, and be in sync with the goals for that property."

Management experts agree that the apartment management industry is undergoing several major changes that will dramatically impact and improve both the profession and those it serves:

* Training. NHP Property Management and other larger firms are developing their own programs and materials, covering such areas as project marketing and leasing, operations, vendor and subcontractor negotiations, hiring and supervision, security issues, and tenant relations.

* Career path. Firms are offering increasingly attractive benefits (such as 401(k) retirement plans, health plans, and life insurance) to apartment managers, resulting in lower turnover and a more stable work environment.

* Legal issues. Compliance with the Fair Housing Act and other legislation is becoming increasingly important, as managers strive to address those issues while minimizing a property's liability and financial impact.

* Technology. On-site computer systems are rapidly evolving beyond rent rolls, payroll, and accounts payable to include market-specific demographic and economic information and other variables to maximize a property's performance.

Observes Ray Jones of Summit Properties: "In the past, resident managers were basically bill collectors, rent chasers, and maintenance fixers. That is changing dramatically. Now, they are responsible for the total environment involving many complicated systems, with customers who want to relate to them directly and communicate with them on a much more advanced basis. Managers are not just clerks punching clocks anymore; they are becoming very sophisticated, very smart, industry professionals."

The Amenities War

In the Dallas/Fort Worth Metroplex, one of the most competitive luxury apartment markets in the country, complexes are offering such come-ons as:

In the Units

* One month's free rent/ senior citizen discounts * All utilities paid/commercial rate utilities/free hot water * Washers and dryers or washer/dryer connections * Free basic cable TV connection * Wood-burning fireplaces with mantles * Frost-free refrigerators with icemakers * Trash compactors * Pantries and linen closets * Built-in microwaves/self-clean ovens * Private backyards/large patios/balconies * Mirrored walls * Bay windows with and without windows seats * Ceiling fans/glass chandeliers * Walk-in closets/vaulted ceilings/skylights * Sliding glass and French doors * Vertical and mini-blinds * Marble vanities/oak cabinets * Built-in bookshelves * Monitored intrusion alarms * New tile and wallpaper/custom paints and carpets * Separate dining areas/breakfast bars

In the Complexes

* Pools with cabanas and hot tubs * Tennis/volleyball/basketball/racquetball courts * Clubhouses with activities center/gymnasiums/dry saunas/steam rooms/showers * Covered parking * On-site car wash facilities * Tanning salons * A nine-hole putting green * Fish-stocked ponds and creeks * Picnic/BBQ areas with gas grills * Extra storage space * Jogging trails * Day care facilities and playgrounds * Organized sports activities * 24-hour emergency maintenance * 24-hour courtesy patrol * TV-monitored access gates
COPYRIGHT 1992 National Association of Realtors
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Author:White, Janet
Publication:Journal of Property Management
Date:Jul 1, 1992
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