Downtown Pittsburgh offers choice: rent or buy
A surging apartment market seems to be making easier the issue of whether to rent or buy Downtown.
“The decision of whether a person wants to rent or buy is pretty much made up ahead of time 99 percent of the time,” says Carole Clifford, an associate broker for Stonebridge Real Estate who has been dealing with Downtown occupancy in the past decade.
Todd Palcic, the active partner in the development firm Penn Avenue Renaissance, says the matter is one of clear-cut demographics in the “new Pittsburgh economy,” built around young professionals who are finding their way early in their careers.
He like other real estate professionals sees renting as the main choice for younger residents, with condo purchases being more the decision for property owners with equity.
Palcic has developed a group of condos Downtown and now is turning to an apartment project on Penn Avenue because he sees their business advantages.
He and others are quick to say attractions in the business market are part of the reasons apartments have become popular. The growth of apartments has created what Clifford calls “a sea change” in the Downtown real estate scene.
When the “move Downtown” drive began to grow, it was built around condos making a dramatic statement in older buildings, she says. Now the demographic has generated interest in apartments from renters as well as builders, she says.
The Pittsburgh Downtown Partnership reports the number of apartments have grown from about 1,870 in the first quarter of 2008 to 2,079 in the last quarter of 2011.
Residency for those units is recorded at 96 percent by the second quarter of 2012.
Planning and development keeps growing. At one point late in 2012, city officials were approving or reviewing plans for 137 apartments along Penn Avenue between Sixth Street and the Strip District.
Ralph Falbo, head of an eponymous development firm, bought a condo at 151 First Side overlooking the Monongahela River and says he never considered the idea of renting. He says he is part of the market of buyers who are selling real estate elsewhere and moving into Downtown as a new way of living.
He believes that group represents the condo buyer market while the rental market is filled more with a “transitional” client, moving either through career development or into real estate ownership.
John Valentine, a condo owner who is president of the Downtown Neighborhood Association, agrees, but sees that group sometimes changing. He believes the defining factor in the rent-or-buy decision tends to be the availability of down payment money.
But, he adds, “a lot of renters become first-time buyers” because they are convinced of the Downtown lifestyle.
That lifestyle can be attractive. Attorney David S. Shrager says he was looking for a simpler lifestyle and the elimination of a 50-minute drive when he moved from Jefferson to the Cork Factory apartments in the Strip District.
He is pleased with the decision and says Downtown offers “one of the most attractive places to live I can imagine.”
Even though he likes his apartment and its location a great deal, he wants to join the condo market because he feels “like I am not getting anything by paying rent.” When he moved into the Cork Factory, he felt comfortable renting as he adjusted from his suburban home, but now he would like his money to provide him with something “other than a place to live.”
But that equity issue is not always a big one.
William Gatti, president of Trek Development, says “the decision is generally made by the time people show up at my door.” He deals only in apartments, including The Century on Seventh Street, so has a rather defined clientele of renters.
But he says some of his renters, particularly those in apartments at 900 Penn Avenue, sometimes inquire about the possibility of buying after living there for a few years.
He says the demographic is “all over the board.”
Some real estate professionals say the development of apartments is being fueled by the availability of financing as well as the interest of clients.
Clifford says financiers sometimes favor funding apartments because mixed-use condo sites sometimes have difficulty selling.
The transition of an older building into a residential unit is a costly one, Gatti says, and the return of cash from the investment slows down if a condo unit is half-filled. Such a risk makes a bank less willing to invest in a project that demands clientele that either have enough to buy the place outright or have enough for a down payment to make the mortgage possible.
Palcic says tax credits that are offered to those who redo historic buildings also create development of apartment buildings. To get those credits, the building must be owned five years with no changes to its appearance. A developer can make sure that happens on a building he owns; when a condo is sold, it is the property of the owner and changes are not possible to control.
He says the tax credits, demographics and the caution on financing all are pushing rental units.
Falbo agrees and says, for that reason, condo buying has become a job for the “cash buyer,” which he says also helps to explain why some residents might end up renting even if they have enough money for a mortgage.
He and Clifford say banks can be cautious about granting mortgages, particularly to buildings of mixed use that sometimes do not sell as quickly. Slow sales mean declining value, Clifford says, so can cause decreasing mortgage approvals.
Falbo says the whole outlook shows “the rental market is here.”
Bob Karlovits is a staff writer for Trib Total Media. He can be reached at email@example.com or 412-320-7852.