Apartment Vacancies Abound

TAMPA - At the peak of the housing boom two years ago, apartment renters like Richard Daniel were at the mercy of landlords in the Tampa Bay area.

Rents were skyrocketing - up to 13 percent a year in some areas, such as Pinellas County - and typical promotions, such as free rent for the first month, had largely disappeared.

These days, though, Daniel finds himself in the driver's seat.

As he searches the Bay area for a new apartment, landlords have been showering him with promotional offers, such as a free month's rent here, or free use of a washer-dryer set there. He turned to Apartment Hunters, a company that matches renters with landlords, to find the best deal.

"I've noticed some landlords, as I'm walking out the door, will say, 'Let us know, whatever it takes to get you in here, we'll work something out,'" said Daniel, 26, who is currently sharing a friend's apartment in the Westchase area.

The once red-hot apartment industry has turned lukewarm over the past six months, and the fallout has turned the market in renters' favor for the first time in several years.

During the housing boom, Bay area developers snapped up apartment complexes, gussied them up with new landscaping and appliances, and turned them into condos. However, they soon found there were too many condos on the market - and not enough buyers.

Today, many of these "condo conversions" are coming back into the apartment pool, and the glut is causing apartment rents to at least flatten in the region. Some industry experts think rents will fall, but other industry experts say they aren't seeing clear signs that will happen.

For renters, this means a bigger selection of apartments on the market and the return of promotions, such as first-month-free specials.

Like the housing market overall, the Bay area's apartment market has been turned on its head in recent years. Between 2001 and today, about 31,000 apartment units were converted to condos in Hillsborough, Pinellas, Pasco and Polk counties, the Cushman & Wakefield real estate firm estimates.

That hit renters hard by causing rents to soar throughout the region. In some cases, apartments started allowing rents to fluctuate daily according to market demand, meaning an apartment's monthly rent could swing $30 or so from day to day.

Steven Ramsey, who lives at the luxury Camden Preserve complex on Tampa's West Shore Boulevard, said the rent for his one-bedroom apartment shot up to more than $1,200 a month last year from about $800 in 2003. He and his partner have since moved to a two-bedroom unit at Camden Preserve, he said.

"At the same time, we were only getting 3 percent pay raises," said Ramsey, 30, who works in an administrative job. "It was either sink or swim."

Camden Preserve's rental rates probably went up more than most apartment complexes, said Michael Slater, who runs Triad Research & Consulting, a Tampa-based firm that researches the apartment industry. It is in a very desirable neighborhood that has seen an influx of high-end condos and rentals.

Within the past six months, though, the industry has changed again. This time renters are in command.

Faced with condo complexes that are half-full, many developers have been trying to lease the remaining units as apartments, or are selling off entire complexes to apartment companies at fire-sale prices. Meanwhile, some people who bought individual condo units also are trying to rent them out, creating what experts call a "shadow market."

About 4,800 units that had been marketed as condos have returned to the apartment market in Hillsborough and Pinellas counties, Slater said.

Apartment occupancy rates had climbed to as high as 98 percent in some popular markets, such as South Tampa. Today they have fallen back to about 91 percent across the entire region, according to Real Data Apartment Market Research of Charlotte, N.C.

That isn't a terrible occupancy rate, experts say, but it is a big change from the heady days of almost full occupancy just a few years ago.

William Sultenfuss, who owns two apartment complexes in Pinellas County and one in Hillsborough, never converted his apartments into condos. However, he says he's competing for tenants against many landlords who did just that.

Today, competing landlords are offering two months of free rent just to fill their vacant units, many of which have new countertops, new appliances and other upgrades, he said.

"It's the softest I've seen ... in five years," Sultenfuss said.

With the glut of apartments, rents theoretically should be falling, but experts differ on whether that will happen.

At the apartment industry's peak two years ago, rents were rising at a rate of 6 percent to 8 percent a year in Hillsborough County, while rents in Pinellas County were rising at 11 to 13 percent. Over the past six months, the growth rate has slowed to 1 percent in Hillsborough and 2 to 3 percent in Pinellas, Slater said.

Slater said landlords have entered a concessionary mode where they're offering promotions to get people to rent empty units, but he is skeptical that landlords will drop rental rates. In his years of studying Florida's rental industry, he has yet to see rents decrease.

John Stone, an apartment broker for real estate firm Colliers Arnold, said landlords spent millions upgrading their apartments to ready them for sale as condos. Many landlords must charge higher rents to pay off the cost of those renovations, he said.

For example, an apartment that might have rented for $700 a month before its conversion into a condo might come back onto the apartment market with a rental rate of $850 a month, Stone said. That phenomenon is boosting the overall average rent in the Bay area, Stone said.

Still, Sultenfuss, the local apartment owner, said that he and other landlords can't continue to hold out much longer. Already, he is considering dropping rates at his complexes, he said. He likens the situation to the single-family-housing market, where homeowners have been reluctant to drop their prices, but will eventually be forced to do so to find buyers.