Young adults drive home rental trend in Western Pennsylvania
David Alligood found a good fit in a small apartment when he transferred to Pittsburgh to supervise 12 regional stores for Target.
“I live in a one-bedroom unit at River Vue, which is ideal for the amount of traveling I must do,” said Alligood, 32, who wants to stay in the city where he has joined civic groups, runs in several races and enjoys the sports scene.
The North Carolina transplant fits into a trend that is driving an apartment building boom. According to data from the Census Bureau, builders nationwide broke ground on more apartment buildings during the past year than in any similar period since 1989. Higher home prices and mortgage rates are pushing young adults to rent instead.
In Pittsburgh, construction of apartments cooled off during the first six months of the year. New permits dropped by 50 percent from 2013, partly because of the severe winter, according to Ross-based research and consulting firm Tall Timber Group.
But demand from the key demographic — young adults — remains high, developers say. Investors, especially from out of town, are putting money into converting and upgrading apartments here to capture their business. The competition among young adults who see apartment living as a more affordable and flexible option than buying a home is pushing prices higher.
“Landlords are not providing rent concessions. Rental rates are increasing 3 to 5 percent annually compared to 2 percent in the past. There has been high-paying job growth here, partially because of Marcellus shale, resulting in high rental rates a lot of newcomers to this region can afford,” said Cindy Kamin, a commercial real estate broker with CBRE.
The increasing number of young professionals making Pittsburgh home are doing so in newer, trendy apartments that fit into their lifestyle, and developers are quickly looking to cater to that growing demographic. Oxford Development Co. has two projects under way, primarily aimed at renters age 25 to 34, said Shawn Fox director of development.
“About 60 percent of the units are either studios or one-bedrooms because traditionally, these tenants do not spend a lot of time in their apartments,” said Chuck Hammel of Pitt-Ohio Trucking, a partner with Oxford in the $60 million, 300-unit Three Crossings development set to open next spring in the Strip District.
Oxford's other development is the 117-unit Hot Metal Flats, a $24 million to $26 million development, set to open next spring in the South Side.
That 25-to-34 crowd is less interested in buying homes as they come out of school with heavy debt, fearful of a big mortgage, Kamin said. Some have not started their own families and don't view owning a house as a necessity.
Financial considerations also seem to be a big factor.
The National Association of Homebuilders reported fewer median-income families were qualifying to purchase a home as the median price of a home nationwide increased from $195,000 in the first quarter to $214,000 in the second.
“I would be interested in purchasing a condo or townhouse in the city if the price was between $150,000 and $300,000, but I haven't been able to locate one where I want to live,” said Alex Rolfe, 28, who was transferred to Pittsburgh by PMC Property Group in February from Jacksonville Beach, Fla. “All I've been able to find are condos priced $500,000 or more, which is out of my income range.”
He is happy to remain in his one-bedroom apartment in PMC Property Group's 526 Penn Ave. building, Downtown, where he spends free time socializing on the rooftop or in the gym.
“While many of my friends with cars spend time travelling to and from home to work and back again, all I do is walk across Liberty Avenue to my job at 3 PNC Plaza,” Rolfe said.
PMC has focused on converting older Downtown office buildings into apartments. The nearly 900 units in its six properties are 97 percent leased, said Louise Giordano, senior vice president at the Philadelphia firm.
Faros Properties of New York purchased the 398-unit Washington Plaza apartments (now renamed City View) and the 811-unit, four-building Allegheny Center apartments (now Park View), and is spending millions to upgrade them.
“The work we are doing at both apartments is to bring them up to the amenities newer apartments offer,” said Debbie Roberts, Faros' general manager of both apartment complexes. Both will include fitness centers, business centers, in-room washer/dryers, rooftop decks, residence lounges and other amenities.
GMH Associates Inc. of Newtown Square, outside Philadelphia, purchased the Cork Factory and the 96-unit Lot 24 apartments with plans to upgrade the Cork Factory and provide activities for tenants of both apartments.
Developer Ralph Falbo said local investors “don't have the capital resources out-of-town developers have.” Still, local builders are finding success.
Falbo, who built the 130-unit apartment at Summerset at Frick Park with Philadelphia investor Pennrose, is the developer, with investors, of an $11 million, four-story, 56 apartment project at SouthSide Works. They're one-bedroom units.
“Young professionals are fine with one-bedroom apartments and are willing to stay in them for two or three years, until they decide to marry or are transferred by their company to another location,” he said.
Walnut Capital opened its first 175-unit Bakery Living apartment building on June 1, and within two weeks, about two-thirds were leased. The developer started the second 175-unit apartment in January.
“It's the fastest lease-up I've ever experienced,” said Gregg M. Perelman, managing partner, whose company owns more than 1,500 rental units locally.
Sam Spatter is a staff writer for Trib Total Media. He can be reached at 412-320-7843 or email@example.com.