Baltimore Multifamily: The Bad News First
Some short-term hiccups are coming for B'more multifamily: 2,900 apartments are under construction and another 700 are expected to deliver in the next 36 months, says Delta Associates CEO Greg Leisch, who keynoted Bisnow’s Baltimore Multifamily Summit on Wednesday at the Hyatt Regency Baltimore. (That's a lot of apartments to fill, and a lot of doorknobs to clutter with Chinese food menus.)
By the end of the next three years, supply will outstrip demand and vacancy will rise from 3% to 4% (in between it'll hit 5%), Greg says. All those numbers, though, still are below the national average. Rents are likely to finish this year down 1% and will dip another percentage point next year but will be back to the historical 4.2% growth by ’17. (Rents just need to take a quick vacation.) But better buildings in strong submarkets like northern Anne Arundel County and northern and western Baltimore County will outperform these averages.
But that’s all part of the cycle, Greg says, and this is a short one. In most of the metrics above, Baltimore fares better than the national average. And lifestyle changes and demographic trends position the national multifamily market well for the long term. The sector’s 9.9% returns/year for the past 20 years put it in a better spot than office and retail. And Millennials who are ditching their cars for public transit, bikes, and walking have more money to spend on rent (and non-prescription eyeglasses). While they go for smaller units, though, they demand more amenities and outdoor space, making older buildings obsolete. In other words, Greg says, in change comes opportunity
Chesapeake Realty Partners co-chair Josh Fidler (who also spoke at Bisnow's event and is snapped with the company’s president, Jon Mayers) says the Downtown core's population has grown 14% in the past 13 years. Why? Don’t discount the cool factor. Recent college grads can’t ignore two Super Bowl wins, he says. He also heard someone say recently that Under Armour has made Baltimore “investable” again.
The more projects going up, the greater that cool factor, as well, says Martin Architectural Group principal Dan McCauley (right, with colleague Ron Seiboth). The numbers of developers and projects are increasing, and the Baltimore region itself is growing as more people commute to different areas.
Enterprise Homes CEO Chickie Grayson (at a previous Bisnow event with St. John Properties Rick Williamson) adds The Wire to the cool factor build-up. It’s the first thing anyone asks when they meet someone from Baltimore, she says, and the young people who make up such a large portion of the renter pool actually like that Baltimore is gritty and real. (That must mean Albuquerque, N.M., has gotten a boost from Breaking Bad.)
Two segments of House of Cards have filmed at Bozzuto’s Fitzgerald, and HGTV has filmed at its Union Wharf, so non-Baltimoreans are seeing it, too, says Bozzuto Management president Julie Smith. As for what locals want, renters start their searches with location and are willing to take smaller units to achieve that. Large apartments, though, are attractive to the other big multifamily-demand pool: Empty Nesters. (They're the only ones watching HGTV.) Julie has hit on a revelation that will send shivers down Millennials’ spines: For the first time ever, kids and their parents could rent in the same building.
Our thanks to our fantastic moderator, CohnReznick partner Adam Kleeman (left, at a previous Bisnow event with Greenberg Gibbons CEO Brian Gibbons). The hot amenities of the day, according to Julie, are fitness (not just gyms but instructors and boot camps), common areas for people to work and thus super high-speed Internet, pet-related accommodations, concierge services, and the biggie: outdoor space. Bozzuto can’t seem to put in enough grills, she says. Josh says Chesapeake Realty has created package receiving rooms (enough to serve 25% of the units at a time) where the UPS guy can leave a package in a keypad-secured locker and let the recipient know via the package tracking number what locker it’s in. That’s huge in an era when people get even their groceries delivered.