New Deals Designed
To Help Fill Apartments

The apartment industry is hurting again, enhancing bargaining power for renters in much of the country and prompting a slew of incentives and freebies for new tenants.

Just a year ago, landlords were scaling back on concessions amid signs the economy was recovering. But the combination of new apartment buildings and low mortgage rates -- which make it easier for people to buy instead of rent -- has pushed the vacancy rate up to 6.9%, the highest in 15 years, according to Reis Inc., a New York-based research firm.

As a result, landlords are offering new tenants one and two months rent free, waiving security deposits and offering everything from DVD players to Crate & Barrel gift certificates. In Manhattan, Peter Cooper Village is offering 51-inch, high-definition flat-screen televisions to new tenants in its apartments. Steve Stadmeyer, general manager of the luxury apartment building, says the idea is to signal that the living room is large enough for a big-screen TV. (Applicants have to mention that they saw the promotion in a newspaper ad.)

Camden Property Trust, which owns more than 50,000 apartments in markets from California to Florida, is offering a choice of free maid service, a private chef or no rent payments -- ranging from three months to a year -- to 40 winners chosen from a drawing for prospective and existing renters.

While some of the come-ons may seem more like gimmicks than legitimate concessions, they reflect that the situation has deteriorated again for apartment owners. The average concession on a 12-month lease ran $73 a month in the fourth quarter, up from $67 a month in the third quarter, according to data compiled by Axiometrics Inc., a Dallas-based research firm.

Things aren't likely to change quickly. Developers started construction on 397,000 apartment units in December, the fastest pace since February 2000. Meanwhile, mortgage rates are close to their lows of last summer -- further shifting the age-old calculus of whether to rent or buy in favor of homeownership.

Indeed, the difference between the cost of homeownership and typical apartment rents has narrowed in about half of the nation's 50 largest metro areas since the end of 2000, according to M/PF Research Inc., a Dallas-based apartment consulting firm, and Torto Wheaton Research, a Boston-based real-estate research firm. Research firm Economy.com estimates that the low rates last year resulted in 358,000 additional households bailing out of apartments to buy a home.

That's the macro picture. The micro picture is that landlords' pricing power varies greatly from market to market, depending upon how strong the local economy is and how many new apartments have been built.

Atlanta, Austin, Dallas, Denver, Northern California, Portland, Ore., and Seattle continue to be renters' markets, where renters can expect to be offered lots of deals, according to G. Ronald Witten, president of Witten Advisors LLC, a Dallas apartment-market advisory firm. "These markets either have weak economies and job losses or excessive construction," he says.

Deals in Dallas

In the Dallas/Fort Worth area, for example, asking rents have fallen 3.5% since 2002, according to RealFacts, an apartment-industry research firm. Concessions in that market have reduced actual rents by as much as 20% in some complexes, the firm says.

Markets where landlords continue to generally hold the upper hand include parts of Southern California, Washington, D.C., Baltimore, Philadelphia, and south Florida. Those markets didn't experience heavy job loss and tend to have constraints on new construction.

Even in stronger markets, specific properties may have to offer concessions to lure tenants. At Avalon at Foxhall, a high-end apartment complex in Washington, D.C., that includes a rooftop swimming pool, the owner, Alexandria, Va.-based AvalonBay Communities Inc., is offering new tenants two months rent free plus a choice of a DVD player, a 32-inch TV, or a Crate & Barrel coupon.

A number of landlords are increasingly using special incentives known in the industry as "Look and Lease" bonuses to lure new tenants. A person would get, say, $1,000 -- either up front, spread out in monthly payments, or deducted from the annual rent -- plus two months rent free, if he or she looks at an apartment and signs a lease for it within 24 hours.

Check for Updates

Hunters should always check the Web sites of apartment complexes for specials. Incentives change frequently, so it is always wise to ask if there are any specials rather than rely solely on ads. Some apartment landlords, particularly the larger companies, have software programs in place that constantly adjust prices based on demand, which can mean the ad in a newspaper may be old and not as good as the most current deal.

Caroline Latham, the chief executive officer of RealFacts, recommends hunters tell landlords what their spending limit is. "You can say, 'well it's a lovely apartment but my limit is $1,050. Is there anything we can do?' They will usually work with you."

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