When Tracy Nyce sold her 5,000-square-foot Lutherville home two years ago, she moved into a 1,700-square-foot rental unit in The Crescent, a high-end apartment complex in Fells Point, and never looked back.
“My house was on the market for almost two years and, in order to sell it, it ended up being a short sale,” she explains. “I said to myself, ‘There’s no way I’m buying another property.’ I decided I would rent because I didn’t want to have to go through that again.”
Nyce is not alone. Soured by the housing bubble, turned off by tightened lending standards, or just not in the mood for the responsibilities of owning, Baltimoreans are joining a nationwide trend and becoming renters. And industry observers say that new category of renters—renters by choice—is growing fast, despite low interest rates that make home ownership relatively cheap.
David J. Doyle, president and co-founder of the luxury rental site, LuxeListHome.com, says his consumer research shows that high-end renters like to be catered to and value the luxury rental experience as a lifestyle choice. They’re active, like to shop and eat out, and have a sense of immediacy when it comes to consumer satisfaction.
“People who value renting are looking for a sense of style, luxury, and service, and they want it now,” he says.
For the most part, he’s talking about people who could perfectly well buy a house if they wanted to.
“Affordability is pretty good right now by historical standards, for buying versus renting,” says Michael Lasota, an investment analyst in the equity division of T. Rowe Price. “But the market for these higher-rent places is often people who are getting married later in life, and having kids later in life. They want the mobility and the convenience of living in an apartment versus a house.” And they don't mind paying a premium for luxurious units with lots of amenities.
Nyce’s apartment at The Crescent, for instance, has large windows facing the water, hardwood floors, stainless-steel appliances, and granite countertops. She loves her spacious closets and the overall upscale feel of the place. She can use the pool, gym, theater, and club room. If she wants a dinner reservation or needs to call a car, the concierge will take care of it for her. But mostly, she enjoys walking away from her home without a care.
“When I had a single-family home, I had to worry if there was a hurricane or a major storm what would need to be repaired,” she says. “Here, I pick up the phone if I need a repair and it’s done the same day, next day at the latest.” And when her lease is up, she can leave without the hassle of selling.
So what about the math of renting versus owning? Nyce pays $3,758 a month, but when she added up her mortgage payment, lawn care and snow removal, and repairs to the house and appliances, plus utility costs, she determined that she’s actually saving money by renting. “The house was 12 years old and things were needing to be repaired and replaced,” she recalls. “It became a monthly expense.”
One of the major factors driving the rental market is the mindset of the millennial generation.
“When you look out to 2020, the number of echo boomers coming into prime renting age is going to rise each year,” says Lasota. “Those 18- to 35-year-olds are more likely to rent.”
One company seeing that trend first-hand is Southern Management Corporation (SMC), which owns and manages more than 24,000 apartment homes in 74 different communities in the Baltimore-Washington area. According to John Cohan, director of marketing, business has been brisk, with the entire Baltimore-area portfolio seeing only 2.2 percent vacancy as of June 2013, a rate even lower than the city’s average. The company’s higher-end apartments, like 39 West Lexington in Baltimore City, were leasing so quickly—despite monthly rents as high as $3,415 for a penthouse—it was obvious the demand for a luxury product was there. Since many work downtown anyway, renters age 33 and under are typically the target demographic for places like 39 West Lexington.
“The millennials are much more likely to choose to rent than purchase,” says Cohan. Millennials tend to move around for work and, therefore, do no want to be tied to a purchased home. They want to live close to work and play in crowded metropolitan areas where home pricing might be high. And they no longer believe that a home is a safe place to put their cash.
“They’re helping drive the luxury market, too,” Cohan continues. “These are people who may have the wherewithal to purchase a house, but they’re leery to do that. But they still want the same quality in design, construction, and finishes in a apartment home that they would find in a for-sale home.”
Good employment opportunity in the metro area is another thing driving the sector. Renting in Baltimore appeals to doctors and nurses from Johns Hopkins and the University of Maryland, financial folks from Legg Mason and T. Rowe Price, government workers, and contractors. Many are single and most are young professionals, with a smattering of emptynesters. Younger renters can offset the steep rent by splitting a two-bedroom with a roommate.
SMC is currently leasing its most exclusive property, The Palisades at Arundel Preserve near the new Maryland Live! Casino. The 330 “ultra-luxury” apartments opened in April 2013. Average rent starts at $2,000. Within four months, the place was 70 percent occupied.
Another major player in the local high-end rental industry is The Bozzuto Group, which has established a niche as the owner of such tony addresses as Spinnaker Bay, where rent can top $5,000 a month, as well as some of the city’s premiere apartments including Eight 50 Aliceanna, The Fitzgerald, and The Promenade at Harbor East. It also manages McHenry Row and The Zenith.
“We hope we’re really good at delivering the equivalent of a Ritz-Carlton or Four Seasons experience to our customers,” says president Toby Bozzuto. He explains that value takes on new importance with the by-choice renter. “I don’t want people to feel they’ve overpaid for something. I want them to feel the way they feel after they leave a really nice restaurant—‘Yes, I paid a little more, but it was an amazing meal, it was worth it, and I chose to do it.’”
When his company developed Union Wharf, its new 281-unit project in Fells Point, Bozzuto says the intention was to “wow with design,” to take the customer experience to new heights.
The glassy, hotel-inspired lobby offers a peek-a-boo view of the harbor just beyond the zero-edge infinity pool. There’s a resort-style 12,000-square-foot clubhouse with fitness center, screening room, bar area, and billiards. An outdoor courtyard features a large fireplace. The interior design uses wood, metal, and concrete to create a warm, industrial vibe, complemented by the work of local artisans like those from Gutierrez Studios.
“We live in a design-centric culture,” says Bozzuto. “Whether intentionally or unintentionally, I believe people perceive design as something important. I don’t mean hoity-toity, unapproachable design, but things with functionality. You like your iPhone because of everything you can do with it. It also happens to be a beautiful thing. Why can’t our buildings be like that?”
That kind of thinking is responsible, in part, for the demise of the rental stigma. After all, if you’re living in Spinnaker Bay, no one’s going to ask, “What’s wrong with you, anyway?”
“It depends on where you are in your life,” says Tracy Nyce. “If you’re young and want a family, a house is perfect, but if you’re a young professional, renting is perfect. There are no worries.”
Demand in the Baltimore metro region seems unquenchable and though city development has focused on the harbor in recent years, the trend is spreading. Data released by Downtown Partnership of Baltimore, supported by the 2010 Census, shows the central business district downtown has seen 130 percent growth in the past decade, ranking it eighth among the nation’s 25 most densely populated areas.
“Strong demand for downtown living has sent the apartment occupancy rate to 97 percent,” says Michael Evitts, vice president of communications at Downtown Partnership of Baltimore. “[Our] recently released housing-demand study, Outlook 2017, shows the marketplace can absorb an additional 5,800 new residential units over the next five years.”
If vacancy rates inch up in the near term, it won’t be because of any letup in demand, but because of increasing supply. Developers are cautiously optimistic, with SMC indicating they have more luxury apartments in the pipeline. Bozzuto also has another project in the works for Locust Point.
And in Owings Mills, the new $500 million Metro Centre, a 1.6 million-square-foot development next to the subway station, has started leasing the first 232 apartments in what will be a 1,700-unit residential component of the David S. Brown Enterprises transit-oriented project. There will also be 1.2 million square feet of office space, retail and restaurant space, a hotel, and educational facilities.
Despite the new construction on the horizon, “demand will continue to outpace new construction for the remainder of the year,” says Victor Calanog, vice president of research and economics at Reis, in a report. “Apartment investors who focus on high-quality buildings in desirable (and supply-constrained) downtown locations are likely to find fewer reasons to worry.”
Location Fells Point
Number of Units 281
Average rent $2,355
What that buys you Located in the heart of Fells Point, there are three private outdoor courtyards, a fitness center with TRX and kick-boxing stations, as well as a yoga studio with Apple TV, all overlooking the infinity pool.
Number of Units 178
Average rent $1,710
Highest rent $2,400
What that buys you Only a 10-minute drive to the U.S. Naval Academy, Spa Cove has all the high-end touches one would expect (granite counter tops, stainless-steel appliances) with the added benefit of waterfront amenities like a private marina with boat slips and kayak storage available for a reasonable extra fee. It’s also convenient to the water taxi.
Location Fells Point, Baltimore
Number of Units 252 units
Average rent $2,426
What that buys you Check out the spinning studio in the fitness center, the heated pool, the outdoor fireplace and grills in the courtyards, and the private screening room with its stadium seating. The apartments feature 10-foot ceilings and kitchens with built-in wine racks. There are marina slips available for additional rent.
Location Harbor East, Baltimore
Number of Units 270
Average rent $2,244
What that buys you The 24-hour concierge can cater to your every need and dog-walking services are available. The garden area is popular with residents and is used to host monthly Eden-sponsored events as well as free “yoga in the garden” every Wednesday. The rooftop pool and club room boast amazing views.
Location Mt. Vernon, Baltimore
Number of Units 275
Average rent $1,901
What that buys you Get buff in the 2,300-square-foot fitness center and yoga studio, then chill in the three stylish lounges with fireplace, billiard table, and bar. There’s also the de rigeuer swimming pool, a waterwall courtyard, business center with Mac and PC computers, conference facilities, movie theater, 24-hour front desk, and garage with EV car chargers. And bring your pet.
The Palisades of Towson
Location Downtown Towson
Number of Units 357
Average rent $1,900
What that buys you Pet-friendly units, some with balconies, have granite kitchen countertops and stainless-steel appliances, full-size stackable washer and dryer, and Wi-Fi. There’s a fitness center, a community room with several flat-screen TVs, a heated rooftop pool, sundeck/courtyard with outdoor fireplace, 24-hour concierge, and a business center with complimentary print and fax services. And the parking is unique: It’s the automated elevator-type you operate with your security card.
Location Harbor East, Baltimore
Number of Units 315
Average rent $2,366
Highest rent $5,482
What the price tag means There are restaurants and shopping steps away from the building or a free bus can take residents from Harbor East to work, shopping, restaurants, attractions, transit hubs, and parking facilities in downtown Baltimore. There’s always someone at the front desk, the clubroom has a catering kitchen, and the garden terrace has a heated pool and spa with a water view.
Location West Side, Baltimore
Number of Units 191
Average rent $2,077
What that buys you It’s the downtown location for the ultra hip: The Zenith has a state-of-the-art fitness center, high-tech business center, full-service concierge, and private garage parking with elevator access to main building.
39 W. Lexington
Location West Side, Baltimore
Number of Units 181
Average rent $1,765 (not including penthouses)
What that buys you This building is on the National Register of Historic Places. Utilities are included in the price and sound-proofed apartments feature cherry cabinetry and marble-floored bathrooms with Kohler fixtures. The gym has a dry sauna, there’s valet dry-cleaning, and an on-call limousine provides chaffeur service around Baltimore.
Number of Units 323 mid-rise apartments; 238 villas
Average rent $2,000 for two-bedroom
What that buys you Residents can use two clubhouses, each with surround-sound movie theaters, fitness centers with kinder care, and yoga/aerobics rooms, as well as the infinity pool. All apartments have a fireplace and are fitted with a “Smart Panel” that lets the resident control thermostat and lights via smartphone.
Number of Units 208
Average rent $2,320
What that buys you Forget the party in 3B: The fun’s on the rooftop where there’s a clubroom with plasma TVs, fitness center with yoga room, outdoor pool and landscaped terraces with views of downtown Annapolis. An added benefit is direct-access garage parking and even organic dry cleaning services.