Apartment occupancy down, renters have upper hand

By Michelle E. Shaw

The Atlanta Journal-Constitution

Apartment occupancy rates in metro Atlanta have slipped, despite lower rents and more incentives, according to one real estate veteran who follows the market.

Tighter credit also plays a role, as potential renters have more trouble getting approved, says another.

Apartment owners are offering up more freebies and other incentives to try to fill units, said Dale Henson, president of Dale Henson Associates, a multi-family real estate consulting firm.

“They are giving more but not getting more,” he said. “This is an entirely new experience in this industry.”

Henson, who has studied the Atlanta apartment market for more than 15 years, said occupancy has fallen from 91 percent to 88 percent over the past 12 months. The housing downturn, the credit crunch and significant job reductions have all played a role.

A loss of more than 133,000 jobs in the metro area over the past year has translated to leases being broken or not renewed, said Tom Wilkes, president of Post Properties’ apartment management division. He said job growth is “one of the key metrics for the apartment market.”

Another factor is the credit crisis, said Russ Webb, vice president of the Atlanta Apartment Association, a trade group. While some might think a wave of foreclosures would push more people into apartments, he said that hasn’t been the case.

“What’s happening with most of these people who are going through the foreclosures, unfortunately for them it does wreck your credit,” Webb said. “So they are than unable to pass a credit qualification, especially if they’ve had a bankruptcy on their record.”

In many cases, people who would normally get an apartment are moving in with family and friends to make ends meet, he continued.

“All of this puts occupancy at levels that we haven’t seen for years,” he said.

Meanwhile, a number of apartment complexes and buildings are in danger of foreclosure or have already been taken back by banks, said Mike Kelly, president and co-founder of Caldera, a Denver-based investment group with an office in Atlanta.

The apartment market will bounce back, Kelly said. Until then, renters have all the bargaining chips, he said.

“Not only do they have the apartment market to look at but they also have the option to rent single-family homes,” Kelly said. “This climate makes the job of managing and leasing apartments tougher.”