Brent Brown: Local apartment rental rates are primed for increases.
Craig Edwards: Attitudes toward homeownership have changed.
It’s no secret Springfield has experienced an apartment boom over the past several years with most new developments downtown and around Missouri State University. This sudden and rapid growth of new multifamily housing is having an effect on rental rates throughout the city, causing many property owners to raise rents to remain competitive.
Brent Brown, CEO of new property management company Entrust Property Solutions LLC, said Springfield apartment owners and managers have been focused on achieving full occupancy instead of adjusting rental rates to meet market values. This has caused a delay in rent adjustments.
“Rent rates are far too low here, but nobody wants to be the first to go up,” Brown said. “It has all been about simply physical occupancy and not economic occupancy.”
According to online apartment search engine RentJungle.com, the average apartment rent over the past six months in Springfield has increased by $33, or 5.2 percent.
Multifamily developers and managers interviewed for this story say the average two-bedroom, one-bath apartment in Springfield rents for $650-$750 per month.
True to historical form, a study conducted last year by financial data tracking firm SmartAsset identified Springfield as the sixth-most affordable location for renters out of the largest 300 cities in the country.
“This market has historically been slow to increase rental rates,” said Lonnie Funk, president of Affiniti Management Services Inc., which oversees roughly a dozen apartment complexes, including Tall Grass and Deep Elm. “Typically, the ownership groups were more interested in being 100 percent occupied than getting an extra $10 or $20 more per month for rent. If you know that you’re going to make money at a certain occupancy, another $10 or $15 a month in the long term doesn’t get you a lot of return if that apartment has been empty for 60 or 90 days.”
As new developments with higher rent rates come online, the benchmark is raised and so are the expectations of renters. Newer properties come with more amenities, such as dog parks, coffee bars and 24-hour fitness centers.
To remain competitive, established properties without these amenities will have to find ways to lure new tenants or keep existing ones, and that will cost money, which means higher rent.
Craig Edwards, general manager of Bryan Properties, said the rise in rates is happening.
“You’ve already seen that in the last couple of years,” Edwards said. “Most companies have raised rents 5 percent to 10 percent in the last three or four years.”
Area developers involved in financing and managing these projects identify several growth factors.
“I think it’s jobs,” Funk said. “The fact that Springfield has job openings … and the unemployment is so low, it’s bringing people in from out of town to live here. And I think that’s helped increase the demand for apartments in town.”
Edwards, whose company is responsible for much of the new development downtown with the 750-bed Bear Village, also cites another reason: the trend toward urban living. He said millennials and Gen Xers are moving out of the suburbs and rural areas where they grew up and back into town to be closer to popular restaurants, entertainment venues and other activities.
Another factor contributing to the apartment boom is changing attitudes toward traditional homeownership.
“That whole millennial crowd that’s out there right now and Gen X that’s behind them, they just aren’t owners,” said Edwards. “They watched what their parents went through in the recession and homeownership for a lot of younger people now just isn’t the American dream.”
It’s a sentiment shared by many baby boomers who now find themselves as empty nesters. They want freedom to travel and to scale down to something more manageable.
All this reflects a national trend toward renting in the multifamily sector that is not exclusive to Springfield.
According to the Yardi Matrix, a national information service that monitors apartment industry trends, these same factors have played out nationwide in other metropolitan areas over the past several years.
Yardi predicts 2017 will remain strong, but rent growth will moderate to 3.9 percent even though it expects 320,000 new units to come on line, an increase of 5.3 percent over 2016. However, it notes this could signal a peak in new construction with overall permits having leveled off.
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