Economic, societal shifts have rentals on the rise in Delaware
Karl Schumann relaxed on a couch with a fresh coffee and his morning paper, but he wasn’t in his living room. He was in the lobby of his apartment building.
Schumann sold his New Jersey home last year to flee high property taxes and retire in Delaware, where he grew up.
He and his wife, Nancy, plan to return to owning when workers finish their new home off Lancaster Pike later this year. In the meantime, Schumann has enjoyed life as a renter in the Towers at Greenville.
“Everything is well maintained for you,” he said. “You can come down here in the morning for fresh coffee and bagels. And I use the gym they have here.”
Amid economic and societal shifts, a growing number of Delawareans like Schumann have sought rental housing for a variety of reasons, and local developers and investors have been quick to respond to the new demand.
Newport-based real estate firm Pettinaro opened the first seven-story Tower at Greenville seven years ago, built the second four years ago and finished the third in September.
The newest 164-unit tower already is more than half leased, said Sally Prendergast, director of corporate services and marketing at Pettinaro Residential.
Since 2007, the peak of a real estate boom that saw historic highs in home ownership, the number of Delawareans living in rented properties has grown twice as fast as the general population. The number of rental units has increase by about 6,000 between 2007 and 2012, according to U.S. Census Bureau estimates.
Several local real estate operators expect that trend to continue. In addition to the Greenville properties, Pettinaro finished construction on the 164-unit Village Park at Paladin in Edgemoor. Capano Management Co. is in the process of completing about 250 units for the Reserve at Becks Pond in Bear, according to New Castle County land records.
And just this week, New Jersey-based Kislak Company Inc. announced it had completed the $14.75 million sale of Greentree Village in Claymont to The Galman Group, which plans to refurbish the apartments.
“It’s been really strong for the last three years, and we see it continuing to be strong, even as the housing market gets a bit better,” Prendergast said of apartment real estate. “People are very cautious about owning, and they aren’t sure they want to take on having a home.”
The gains have been pronounced in the middle to high-end market, driven by downsizing baby boomers, families recovering from a foreclosure and younger professionals hesitant to commit to ownership. Rents range between about $1,000 and $1,550 per month, and the new complex is almost entirely leased.
Month lease payments for the Towers at Greenville start at $1,500 for an unfurnished one-bedroom, and they appeal to tenants with corporate jobs who want the flexibility to relocate, Prendergast said.
At the same time, companies have changed their approach to funding employee transfers. Instead of elaborate relocation packages that involve assistance buying and selling a home, more companies offer a flat payment to help the employee move, another factor boosting rental rates, Prendergast said.
Even for people with good jobs and who want to stay where they are, financing a first home remains challenging for those without impeccable credit.
“The pendulum has swung the other way where it’s very difficult to get a mortgage for a house today,” said Rob Holland, president and co-managing director of Kislak. “The banks are scared.”
Aside from strong consumer demand, apartments have attracted growing interest from real estate investors for a host of other reasons, Holland said.
Unlike longer term leases in office space and retail, apartment owners have protection against rising costs or interest rates depressing the value of their investment. As long as demand for apartments stays strong, they have an easy way to deal with increasing expenses. Simply raise the rent when one-year leases are up for renewal. It’s a safe bet they will continue to build and buy apartments in the near future, he said.
“For a lot of investors out there, it’s a stable reliable income stream, and that’s why they buy it,“ Holland said. “There’s that certainty of what you can expect, and that’s why investors like it.“