It was about March when Steven Fifield realized something good was happening to apartment lease-ups in the Windy City. The Echelon Apartments, a 350-unit luxury community in Chicago, which had occupancy levels bouncing around in the high-80 percentiles for more than a year, began a meteoric climb to 99 percent occupied before falling back to a 97 percent sweet spot.
Serendipitously, March was also the month that the Fifield Cos. opened Alta at K Station, a two-tower complex of 848 luxury apartments in downtown Chicago. “The results there have been much more significant,” says Fifield, the president and founder of his namesake Chicago-based multifamily development firm. “We were projecting about 10 units leasing per week, and we’ve been knocking off 20 units. The West tower hit 60 percent leased in June, which was twice as fast as expected. If the leasing pace stays at the same clip, we are going to lease all 848 units within a year, which would be phenomenal.”
Whether you credit 2010’s hot leasing action to moderate economic improvements, dialed-back pro forma expectations, creative on-site marketing, aggressive and seasoned sales staff, or just being in the right place at the right time, developers and property managers are finding pleasant surprises with concession burn-off and apartment absorption rates that were mere pipe dreams just a year ago. While rents have a ways to go before everyone starts waving recovery flags, leasing pros are nonetheless responding to improved traffic with a renewed focus on marketing and closing fundamentals to get while the getting is good.
Anecdotally, apartment operators across the country report a decrease in concessions by about 60 percent. Where a three-month special was the 2009 norm, 2010 lease-ups are sailing through with just a month and perhaps the waiver of an application fee. On the occupancy front, a market report from New York-based Reis notes that national apartment vacancy declined to 7.8 percent during the second quarter of 2010 from a 30-year high of 8 percent in the first quarter of 2010. Meanwhile, net absorption of 44,199 units during the second quarter was the highest it had been in 10 years. And rental rates are increasing along with occupancy, with asking rents increasing 400 basis points and effective rents jumping 700 basis points.
“The 2010 leasing season has been tremendous,” says Cindy Clare, CEO of McLean, Va.-based property management firm Kettler. “We have properties where we are 25 to 30 percent ahead of our projections.”
LOCATION, LOCATION … Amenities?
The cliched mantra that all real estate is local and location is the most important element at play is nevertheless a factor in the recent leasing activity. Clare says unexpected job growth in Kettler’s core Washington, D.C., and Mid-Atlantic markets has helped push lease-up velocities and occupancy levels. Reticence among consumers to return to the for-sale market has likewise been a catalyst to leasing office action.