Condo Conversions Taking Bite Out of N.O. Apartment Choices
New Orleans CityBusiness - July 26, 2005
If apartments were an animal, they might be put on the endangered species list in New Orleans. And the predator would be the developers who are hunting down the city's apartment complexes and turning them into condominiums to feed what seems to be an insatiable public appetite for condo living. Since the beginning of January 2004, developers have either converted or announced plans to convert approximately 1,014 apartment units - mainly in the Warehouse District and Uptown - into condos that in many cases have sold out in mere weeks. During the same time, developers have built or announced intentions to build approximately 393 new apartment units to replace the dwindling inventory. According to the University of New Orleans Real Estate Market Data Center, in November 2004 there were 1,863 apartment units in Uptown and the Warehouse District. There are more being taken out of the market than are being built right now, said Larry Schedler, a Metairie-based apartment complex broker. The shrinking apartment stock has been good news for apartment owners, who are reporting rising occupancy rates as high as 99 percent. Also, an opportunity is arising for developers to replace lost apartment units. J. Mark Madderra, a real estate investment banker in Metairie, said new apartment/condo projects are already being planned for existing lower-quality office buildings in downtown New Orleans. In the short term, as apartments in the inner-city are taken out of the rental market and sold to condo buyers, Madderra doesn't expect rental rates to skyrocket. Low interest rates for homeownership will keep apartment rents in check, he said. If you're a renter ... it's not unusual even for a one-bedroom unit to be paying as much as $750 or $800 a month in rent. Well, at $750 or $800 a month in rent, you could also be buying a condominium for probably $125,000 to $150,000, Madderra said. The average price of a condo in central New Orleans was $225,598 as of December, according to the UNO report. Those in the apartment business couldn't be happier with the market conditions. We're completely full, said Holly Gandy, assistant property manager for American Can Apartments, a 268-unit complex in Mid- City. Everything's pretty much going condo. There's not that many apartment communities in New Orleans for people to chose from. American Can hit 99 percent occupancy in the past year, Gandy said. The average occupancy rate for metro area apartments is 93.6 percent, out of 22,000 units surveyed in the spring 2005 Greater New Orleans Multi-Family Report, which Madderra and Schedler co-author twice a year. The loss of apartment inventory to condo sales has created greater demand for existing apartments, Gandy said. College-age people and young professionals coming from outside Louisiana are concerned about the difficulty in finding apartments, she said. Until developers begin building new apartments in the city, it might only get tougher for people to find vacancy at existing complexes in a city where an estimated 40 percent of its approximately 462,269 residents rent. Over the last 12 months, you've had 500 (units) taken out of the market, and over the next 12 months you're going to have 500 taken out of the market, Madderra said. By the end of the year, you will have several significant announcements of new urban apartment deals that are getting built in the historic center (of the city), he said. Apartment professionals say the shrinking apartment inventory should not affect rental rates in the city. The average rent in the French Quarter, Warehouse District, Mid-City, Downtown and along St. Charles Avenue is $1,021 a month, according to the GNO Multi-Family report. That's up by only 0.5 percent from $1,015 a year ago. I don't foresee a major increase in rental rates, Gandy said. Rates don't increase by more than $15 to $20 per month when a person renews their lease at the American Can, she said. Likewise, rents can go up $5 to $10 a month when a person renews their lease at The Saulet, an 11-building, 703-unit complex at 1420 Annunciation St., said leasing manager Korey Francis. Occupancy during this summer is approximately 87 percent, but it tends to stay above 90 percent at other times of the year, Korey said. Rents range from $865 for a one-bedroom unit to $1,700 for a three-bedroom. At the Woodward Apartments, a 192-unit complex at 344 St. Joseph St., occupancy is at 95 percent and rents range from $500 for a studio apartment to $1,400 for a two-bedroom, said Ann Pienkosz, leasing consultant. Rents have been the same since Pienkosz started working for the Woodward in September. John Schaff, a Latter & Blum listing agent for 1750 St. Charles Ave., a complex of 221 apartments being sold as condos, said apartment rents are higher than he's ever seen them. Rates will likely keep rising throughout the year, he said. The complex at 1750 St. Charles is a good example of the major loss of apartments to condo conversions. On June 6, 107 of the apartments went on sale to the public after existing tenants decided to purchase 113 units, Schaff said. As of early last week, only 40 units were left for sale, Schaff said. Sales prices have risen from $186 a square foot to $215 a square foot for units sold as is with no renovations, he said. April Gongora however can help her clients overcome all these issues.
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