Apartment Developers
Have Lofty New Designs

Rental apartments are getting lofty.

When deciding recently where to put a sleek modern sofa in his one-bedroom apartment in Atlanta, Art Farmer had lots of options. The rental unit, in a complex developed by Gables Residential of Boca Raton, Fla., was built with the fewest walls possible, leaving him with lots of open space in what developers grandiosely call the great room.

Ultimately, Mr. Farmer chose to put the sofa smack in the middle of the 960-square-foot room. "It will help establish the area as being a living area as opposed to a living room," says the 48-year-old photographer and graphics designer. "I couldn't do this with a more boxy apartment."

Once synonymous with struggling artists and hip urban areas like New York's SoHo, wide-open loft apartments like Mr. Farmer's are fast growing in appeal to many Americans who don't necessarily live on architecture's cutting edge. But unlike traditional luxury lofts carved from dank warehouses or converted steel mills, the new loft standard is by design. More developers are building the big-enough-for-rollerblading units from scratch.

The loft-izing of rental apartments, happening across the country, is one attempt by landlords to help stem the recent flow of people exiting apartments for home ownership. There's even special real-estate lingo for the ready-made spaces: "soft" lofts or "faux" lofts . The movement is also an attempt to gain competitive advantage. "There's an oversupply of apartments in this country," says James Murdock, a contributing editor of industry newsletter Multi-Housing News, "so it really comes down to needing your product, particularly if it's a new product, to stand out and certainly not be lacking in terms of your competitors."

Down With the Walls

Instead of clearly demarcating where rooms begin and end -- the default style for most apartments -- the open-floor plans of new loft buildings give residents the freedom to decide if they even want separate rooms at all. Some big national apartment developers, not known for adventurous design, are softening to the loft idea, enlisting cutting-edge architects for help.

Archstone-Smith, the nation's seventh-largest owner of rental apartments, recently opened a 212-unit, high-end apartment complex in Crystal City, Va., in which all the units have kitchen islands "to blow open the space," says Al Neely, the company's chief development officer. Many will have open-floor plans and partial walls. The community, Lofts 590 in Pentagon City, is "the first time we set out to come out with something new and different and edgy," he says.

At Avalon at Glen Cove, a luxury apartment building in Glen Cove, N.Y., some of the 256 units feature open-floor plans and other loft-style features such as kitchen islands.

That's putting it mildly. Archstone-Smith "is not like your smaller developers out there pushing the edge, they're more traditional. It was harder for them," says Sami Kirkdil, a principal at SK&I Architectural Design Group of Bethesda, Md., which worked on Lofts 590. "We really had to do a lot of selling to get them to go with this. Even though some people in the company liked the idea, they had to sell it to the higher ups."

Dana Hamilton, Archstone-Smith's executive vice president, says the company spent a lot of time looking at the for-sale market in Washington, D.C., watching the acceptance of loft-style product, and became more comfortable that it would be successful in the rental market. Plus, she added, the loft-style apartments are unique within the Crystal City submarket.

Rent at Lofts 590 are $1,970 a month, compared with an average monthly rent of $1,500 for a conventional 1,000-square-foot apartment in Crystal City.

Avalon at Glen Cove, a recently-opened upscale apartment complex in Glen Cove, N.Y., developed by AvalonBay Communities Inc., boasts open-floor plans or "great rooms" and kitchen islands. In New York City, the Alexandria, Va., company is ratcheting up the cool quotient with a complex where 500-square-foot studio apartments will contain moveable closets -- long rectangular wardrobes that can function not only as storage space but as walls to separate areas. SLCE Architects of New York and Arquitectonica International Corp., of Miami, designed that complex, which is expected to open in mid-2005.

At a Premium?

Though some developers hope they can charge a premium for units with well-designed open-floor plans, analysts and others remain skeptical. The sluggish nature of the rental market means rents haven't been increasing much. And the national average vacancy rate remains higher than apartment landlords would like -- 6.6% in the third quarter, up from 6.5% in the year-ago quarter.

The Atlanta market has been soft "so we're not able to get much of a premium for loft units now," says Joseph G. Wilber, a vice president at Gables Residential, adding, "we believe when the market gets stronger, we will get a premium."

Robert Stevenson, an analyst with Morgan Stanley in New York, points out a somewhat limited market for lofts . The developers are targeting affluent renters, the very kind that likely could afford to buy a loft condo rather than rent. "You're not going to market lofts to the B-quality renters, the renters by necessity," he says. Also, lofts are hardly family- or even roommate- friendly. "You're not going to market lofts to families with children, so it's basically singles or couples without children. Usually it's a person living alone."

What's more, some analysts warn that developers run the risk of overestimating this trend's legs and building too many lofts . "They'll want to make sure they're in an area where they can command a [higher] rent, where there are renters looking for that," says Rod Petrik, an analyst with Legg Mason Wood Walker in Baltimore.

Apartment developers insist they won't get in over their heads, at least for now. "We're doing a portion of the apartments in our communities as lofts , we're not doing whole communities as lofts ," says Mr. Wilber of Gables. "And usually only in urban locations."

Executives at Atlanta-based Post Properties Inc., which has offered alternative floor plans longer than other national apartment companies, say they are similarly selective in terms of where and when to open up.

Email your comments to rjeditor@dowjones.com.