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Apartment Boom Emerges As House Sales Lag

By KENNETH R. GOSSELIN

March 31, 2012

New home construction is struggling to get its footings in Connecticut, but there's a building boom in the making for one kind of housing that you might not expect: apartments.

In Greater Hartford alone, there are plans for as many as 2,500 apartment units that would rent at full market rates. The apartments could be ready for tenants in the next three to five years, representing hundreds of millions of dollars in investment.

The driving force: Apartment vacancy is expected to fall to less than 3 percent this year in the Hartford area, making it one of the strongest markets in the country.

The demand is being stoked by consumers putting off house purchases and choosing to rent instead; empty-nesters shedding their big suburban homes in favor of apartments where maintenance is mostly done for them; and homeowners displaced by foreclosures forced into renting.

"We're looking at amazing demand and occupancy levels that we have never seen," said Steve Witten, an apartment expert at Marcus & Millichap in New Haven. "A year ago, there were a few large projects that couldn't get funded. Now, lenders are back in force."

There is the danger, of course, of too many apartments coming on the market at once, but developers see a more gradual rollout that will be absorbed as job growth accelerates and the economy improves.

Most in demand are the newest apartments that offer spacious living quarters and the best amenities. And while hundreds of units are planned, the market, for now, is exceedingly tight for those searching for just the right rental.

That means rental rates are rising, a concern for advocates who say housing is increasingly out of reach for working families. And even for people with plenty of money to spend, finding the right place can require the sort of quest most of us associate with Boston and New York, not central Connecticut.

When Breton Boudreaux accepted a teaching job at an area college earlier this year, he thought six weeks was plenty of time to find an apartment while staying temporarily with friends The lease on the apartment Boudreaux and his wife Samantha had in New York City expired on March 3.

The couple wanted a two-bedroom apartment in the 1,000- to 1,400-square-foot range. They didn't want to have to move in a year, preferring instead to grow into an apartment, especially if they started a family.

"We saw a bunch of places that we liked," Boudreaux said. "But the places have gone fast. One luxury building in downtown Hartford I saw on a Thursday or Friday, called on a Monday to start the paperwork, and it had already been rented over the weekend."

The couple came close to subletting a condominium near West Hartford Center in February, but that fell through when the owner wanted to change terms. They also liked the first floor of a two-family house in West Hartford, but another apartment hunter beat them to the lease signing.

Boudreaux was starting to get nervous. His wife was still in New York, coming up on weekends to look at apartments he checked out during the week. Finally, it was the last week of February, just six days before they had to be out of their New York apartment.

The clock was ticking. And they still had no apartment in Connecticut.

'They Are Not Skimping'

This is the sort of renter that developers like Martin J. Kenny believe will flock to new apartment developments, several of which are planned for Greater Hartford communities that haven't seen any major apartment construction in decades.

Kenny, who built the Trumbull on the Park apartment building in downtown Hartford, hopes to develop two complexes, including the 78-unit Mallory Ridge in Bloomfield and the more ambitious, 250-unit Flanagan's Landing on the site of an old mill complex in Glastonbury.

In Glastonbury, Kenny sees a town ripe for apartment development where the sparse, existing stock is 40 or 50 years old. He needs only to look to his $13 million redevelopment across town at the old Addison Mill, turning it into 55 apartments that opened for tenants in July 2009. Seven months later, the complex hit 95-percent occupancy. Today, it's at 100 percent, he said, and there's a waiting list.

"The bottom line is the world is changing," Kenny said. "Echo-boomers are not buying houses as soon as my generation. But while they are doing that, they don't want to live in third-rate apartments. Even though they may need to save money to buy a house, they are not skimping in the meantime. They want a nice place."

In central Connecticut, the tone was set for new apartment complexes with the construction in 2004 of The Hawthorne at Gillette Ridge, a 246-unit upscale, suburban apartment complex on the Cigna campus in Bloomfield. In 2007, the complex sold for $52.5 million, or $213,000 per unit, a record for the region.

Just a year later, the 48 apartments at Blue Back Square in West Hartford became a model for the "town square" style of development, with housing within walking distance of shopping and entertainment. The apartments quickly filled up despite the onset of a deep recession, commanding rents that are, in some cases, 50 percent higher than other upscale complexes. A one-bedroom flat at Blue Back that encompasses 623 square feet, for instance, starts at $1,635 a month. That compares with a one-bedroom, 900-square-foot apartment at the Mill Commons now under construction in Simsbury that is expected to start at $1,500 a month.

Several of the planned apartment complexes are seeking to capture some of the success now enjoyed at Blue Back.

In South Windsor, Evergreen Walk LLC and its principle, John Finguerra, have secured approval to add 200 upscale apartments at Evergreen Walk shopping area, just over the town line from the Buckland Hills mall.

"Evergreen Walk needs the vibrancy of a full-time community that would infuse new energy," Finguerra said. "Our project is a town square nucleus of good community space."

The most striking example, in Windsor, is Great Pond, the town-square approach on steroids. In the first phase of a 20-year plan on the former Combustion Engineering site, between 300 and 400 apartments will be built, possibly getting underway this fall. The development also would include one- and two-bedroom houses, retail and industrial space.

In downtown Hartford, strong demand for studio and one-bedroom apartments is propelling the conversion of the former Clarion hotel on Constitution Plaza in 199 apartments.

If the state continues adding back jobs at the 5,000-a-month pace it did in January and February, Finguerra and other developers may find demand stepped up even more as workers who have doubled up with roommates or moved back with their parents, strike back out on their own.

Rising Rents

If demand from renters remains at its current levels, Witten sees rents this year rising at nearly double the rate of 2011, running counterpoint to the price declines seen in house and condominium sales.

Rents advertised by landlords are expected to rise 4 percent to $1,041, compared with a 2.1 percent increase last year, Witten says. Rents that are actually inked into lease contracts will rise 4.4 percent, to $1,005, compared with a 2.4 percent gain in 2011, Witten said.

Higher rents worry housing advocates like Betsy Crum, executive director of the Connecticut Housing Coalition, which is pressing for more moderate-priced housing initiatives in the state.

"We're not even talking about our lowest income folks, just folks," Crum said. "Everyone needs housing affordable to them."

Despite rising rents, calls from apartment hunters coming into the Coldwell Banker Residential Brokerage office in West Hartford have been brisk for months, each agent answering at least five calls a day, perhaps 100 a week for the office, according to Daniel Horner, a Coldwell Banker Realtor who has specialized in rentals for the last decade.

In West Hartford, there may be 25 rentals at any one time listed with agents, though the overall number may be closer to 75 when you include those advertised directly by landlords or on Craigslist, Horner said. That still isn't enough to meet demand and many of those rentals are older units that are less attractive to apartment hunters, he said.

"We could use another two complexes like Hawthorne," Horner said. "They would fill up pretty quickly. People are willing to pay a premium because they are new."

That goes not only for young professionals, but for empty-nesters selling their homes, Horner said, "if they sell their home, they want to go to a decent rental."

Horner said workers relocating into the area from other parts of the country are confounded by the apartments they have to choose from in Connecticut, particularly central Connecticut.

"Anyone who comes in from out of state, they can't comprehend our old apartments," Horner said. "They are coming from newer apartment complexes. They have car washes, laundry and parking."

Happy To Rent

Some say the housing recession of the past five years may be forever altering how people regard where they live. Once, it was nearly a given that a house would be bought, it would grow in value and then be sold to downsize and provide retirement income.

But that scenario has been turned upside down as many young workers have seen their parents lose value in their homes in the recession, many finding themselves with mortgage balances higher than what the property is worth.

"So, prior to this recession, most people thought that buying a home and the bigger the home, the better that housing prices would always go up," Eric Rosengren, president of the Federal Reserve Bank of Boston said, in a recent interview with The Courant. "Instead, an awful lot of people are thinking, 'Gee, if I'm not sure the price of homes are going to go up, maybe I would be just as happy to rent, knowing I don't have to mow the lawn or shovel the snow.'"

There are indications that the generation now reaching what would have been the house-buying age for their parents appear to be rethinking the step, he said.

"The younger generation has been affected by this recession in a way that may have changed buying behavior," Rosengren said. "Now, its way too soon to know if that is going to be a trend or not. But I think it's an interesting issue about whether over time people that are in the 20-30 year [age group] are going to view houses very different than [older age groups] who were brought up thinking that this is always going to be a good investment."

The cycle of buying a house, paying down the mortgage, selling and buying a smaller house in retirement and living off the sale proceeds may have been altered, Rosengren said.

"That's been the savings way for many Americans," Rosengren said. "Now, it's America nightmare for many."

A Two-Family Solution

With less than a week to go before their lease in New York expired, Breton and Samantha Boudreaux were talking on the telephone, he in Simsbury, she in New York. It was a Tuesday, and the couple was hopeful of leasing a two-family house near West Hartford Center. He'd seen a version of the lease, but the couple had yet to sign the final version.

"We thought we were going to get this place," Breton Boudreaux recalled. "But we had no legal documentation to show we have the place."

Boudreaux drove down to New York Thursday night. The couple spent all day Friday packing. On Saturday, the day their lease expired, the movers arrived, packed up the couple's belongings. They drove to West Hartford, arriving at the two-family house 20 minutes before the movers.

"We signed the lease right then," Boudreaux said. "The movers showed up before [the landlord] pulled out of the driveway. Metaphorically and physically, the ink wasn't even dry."

While Boudreaux said he is happy with the apartment, the couple has to buy a washer and dryer something they hadn't planned on.

"We never really found the ideal place," he said, "but this is a good place."

Reprinted with permission of the Hartford Courant. To view other stories on this topic, search the Hartford Courant Archives at http://www.courant.com/archives.
| Last update: September 25, 2012 |
     
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