Landlords say recession creates renter's market

By DJ Slater
Wausau Daily Herald

When Tammi Barnes moved from Medford into her new home at Grand Avenue Luxury Apartments last week, she did it almost without spending a penny.

To lure Barnes, 43, her landlord offered huge incentives -- $1,000 in free rent and a reduced security deposit, from $699 to $199.

"(My husband and I) have been talking about moving for a long time, because we wanted to move to a bigger town," she said. "I'm glad we waited until now."

Now is the time for tenants to shop for deals. The economic collapse has forced many people to find new living arrangements -- doubling up with roommates, moving back in with parents or otherwise cutting costs.

Coupled with the explosion in construction in the Wausau area, which has seen more than 1,000 new apartments built over the past five years, the economy has flooded the market with deals such as the one Barnes found.

The Wausau trend is being repeated across the country, where about 8 percent of all apartments now sit vacant, according to Reis Inc., a New York real estate research firm that monitors rental units in metro areas. The national vacancy rate sat at about 6.2 percent a year ago and at 3.2 percent in the fourth quarter of 2000, according to Reis Inc.

In the Wausau area, vacancy rates have varied dramatically from property to property. John Fischer, a local landlord who manages about 200 units in the Wausau area, said the abundance of vacant apartments has left him scrambling to find tenants.

His largest property, Pioneer Village, a 76-unit complex on Sternberg Avenue in Weston, has a vacancy rate close to 50 percent.

"A lot of it has to do with the fact that I'm competing with hundreds and hundreds of new units," Fischer said. "When I've got units with new updates, but I'm dealing with 1978 construction against 2008 construction, which one are you going to choose?"

On top of that, many property managers lost dozens of tenants to the American Recovery and Reinvestment Act, which still is providing first-time homebuyers with tax credits as high as $8,000, according to the Internal Revenue Service.

And then there's the overall economy -- Wausau's unemployment rate is at about 11 percent -- that has forced people to cut costs everywhere, some by moving to cheaper apartments.

"It doesn't matter how old you are. You have to go find shelter," said Larry Sommer, the treasurer of the Wausau Area Apartment Association. "If you can't pay the rent, the landlords don't let you stay there until you get a job."

Incentives now are common at Wausau-area apartments, even from owners who never before had to offer them to get tenants. Fischer, for example, has managed properties for 16 years and never had to cut a deal until this summer.

Barnes shopped around the Wausau area for about three months looking for the right apartment, she said. She found some places with rent between $500 and $600 a month but without good amenities, such as a garage and newer construction.

Barnes settled on her current home because the rent incentives, as well as the on-site amenities, were too good to pass up.

Some property managers, such as the ones at Winding Ridge Estates in Weston and Metro Center Apartments in Schofield, are trying to make their properties very attractive to potential renters such as Barnes, offering incentives that are drastically different from a year ago.

Last November, both apartments offered one month of free rent with a one-year lease. This November, Winding Ridge Estates is offering free rent until the new year, while Metro Center Apartments is offering $1,000 in free rent and a $199 security deposit, according to property managers at each complex.

"You have to adjust to make it work," said Charles Schommer, the property manager at Metro Center Apartments, whose building has a 3 percent vacancy rate. "It's truly a buyer's market. Pretty much everyone is giving away rent concessions."

The incentives won't last forever, Schommer said. Once the market rebounds and more people find steady employment, Schommer expects the incentives to stop or fall back to usual levels. Until then, however, he and other property managers are stuck dishing out concessions to keep the vacancy rates low.

"It affects the bottom line," he said. "Every time you give money away, it takes that much longer to get it back."