Rental Real Estate Market Slows

Rental Real Estate Market Slows

No single reason, demographer says

Ray Anderson is pulling out all the stops. A property manager for the Vienna office of Weichert Real Estate, Anderson is responsible for renting almost 195 properties. Of those, 27 are on the market right now.

"If we don't put a tenant in there, everybody's losing," he said.

Hence the marketing blitz.

Anderson and his competitors are filling ad pages with their listings, printing direct mailings, targeting email addresses and generally doing everything short of shouting their listings on the rooftops of Fairfax County to generate interest.

And why are they going into overdrive right now?

"The rental market seems to have dropped somewhere five, six months ago when all of a sudden it just went boom," Anderson said.

ANDERSON'S EXPERIENCE echoes a recent study by the Fairfax County Department of Systems Management for Human Resources. Last January, demographers from the county gathered information from all apartment complexes in Fairfax County and compared their results with surveys from previous years. Although there are some differences between the survey and Anderson's experience — for instance, the study looks only at apartment complexes while Anderson deals mostly with private property owners who want to rent out their property — the survey told him what he knew already: this is a bad time to own rental property in Fairfax County.

According to the survey, a total of 5.5 percent of apartment unit in Fairfax County were vacant, up from a vacancy rate of 2.5 percent in 2001. Newer complexes and those in the Sully District tended to have higher vacancy rates.

"The newer complexes typically are more expensive," said Ann Cahill, a demographer with the Department of Systems Management for Human Services. "Inexpensive units are rarely vacant."

At the same time, the average monthly rent in the county was 2.5 percent higher in 2002 than in 2001, far below the 14.2 percent increase in rent in 2001. In the Hunter Mill and Sully districts, the average rent price actually dropped.

"This is the first year we have suggested to out repeat customers not to raise the rent," said Anderson. "In certain instances we have negotiated with our clients to lower the prices to make them palatable."

WHILE IT IS impossible to isolate a single reason for the soft rental market, Cahill said, the hi-tech bust and low interest rates might have something to do with it.

"You may be seeing some employees leave the area because of the [hi-tech bust]," she said, even though she noted that the county has yet to see a significant drop in population.

Also, with the low interest rates, "it's possible that people are moving out of rental properties into their own properties."

According to Anderson, the county approved construction of many new apartment units to accommodate people who had been priced out of home ownership. All the new apartments, he said, "skewed the supply demand issue."

As a result, "there are more units out there now than there is demand."

But Ron Koch, the Sully District Planning Commissioner, said that the county has no control over what gets built so long as the developer's application is in order.

"We just can't arbitrarily and capriciously deny an application because of vacancy rates," he said. "We don't let economics come into it."

The downturn in the rental real estate market comes at a time when the county is aggressively promoting apartment complexes located near public transit stations. If public transit is extended out the Dulles Corridor, it is likely that more apartment buildings will go up around the stations.

Despite the downturn, Stewart Schwartz, the executive director for the Coalition for Smart Growth, expressed confidence that the new transit-oriented apartments would prove popular.

"I think the demand is going to keep rising," he said, noting that apartments near transit stations are very popular in Arlington, Alexandria and the District.

The situation in Fairfax is due to the hi-tech collapse, he added.

"There were so many new complexes built out there for the employees with the pools and the weight rooms, very California, very trendy," he said.