The vacancy rate is low enough that StuartCo is building more units and upgrading many of its older ones.
Good times in the multifamily housing sector are providing a ripe opportunity for one of the Twin Cities' biggest apartment owner-managers to build both new apartments and reinvest in its existing stock of 5,000 units.
With a long-term ownership portfolio that includes market-rate apartments and townhouses, a senior housing campus and affordable housing, the diversity of StuartCo's holdings makes it a good barometer for the state of industry.
And that state is pretty good, said CEO Lisa Moe during an Minnesota Commercial Real Estate Women event this month.
"Twin Cities vacancy rates for the third quarter fell to 2.3 percent -- almost a 2 percent decrease from the year-earlier figure," Moe told the audience. "Essentially, for most of 2011, our market was at full occupancy."
Those kinds of numbers separate the multifamily sector from its commercial real estate cousins -- the industrial, retail and office markets -- where vacancies are much higher.
That solid demand has also prompted StuartCo to launch a pair of new construction projects in first-ring suburban in-fill locations, getting an early jump on a recent wave of multifamily building in the Twin Cities.
One is Genesee Apartments, a 212-unit, 22-townhouse complex on the site of a former car dealership in Bloomington. The other is the View, a 125-unit project in the New Brighton Exchange redevelopment area. Both will open in June.
Upgrades of older units
Yet despite those trappings of success, the boom in apartment demand is only slowly translating into higher rents.
Moe told Bricks & Mortar along the sidelines of the event that the biggest rent increases are coming from units where StuartCo has committed capital resources made available by the boom to perform physical upgrades, such as energy-efficiency makeovers.
"It's always easier to do it when the market is good versus when the market is bad," she said. "We have been raising rents since early 2010, increasing them 3 to 5 percent on average."
The properties producing the best levels of new rent revenue are ones that have added value with upgrades. Hence the company's strategic commitment to pour resources into the improvements.
StuartCo has been spending $250 to $25,000 per unit to accomplish the upgrades. Some of the higher totals come from units getting major facelifts with new kitchens as well as older buildings being outfitted with such items as in-unit washer-dryers.
The biggest bang for the buck, however, comes simply from sprucing up older apartments with new lighting fixtures and a fresh coat of paint, Moe said.
With its affordable properties, "putting in that lighting package and painting the unit can really give it a whole new life," she said.
Another aspect of the business getting an upgrade in these more flush times is staff training, a more important factor now that prospective tenants are diverging into two camps that each need special care and attention.
Those groups are the younger people, who do their apartment hunting using online tools, and the older folks who don't.
Many people "tour, apply and lease online without actually seeing the apartment," Moe said. "We've had some people from out of state do that. So we've upgraded into a full, robust software program that allows people to select floor plans, move furniture in, look at pricing, and then interact online with a leasing agent."
Training staff members in both the art of social media-based marketing and that of tending to more traditional tour-takers can be a time-consuming and costly task, yet it's necessary for apartment managers, Moe added.
Don Jacobson is a St. Paul-based freelance writer. He can be reached at 651-501-4931.