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With New Apartment Complexes and ASU Enrollment Growth Slowing, The Rental Market ‘Party is Over’

By Jesse Wood

Aug. 4, 2012. With ASU enrollment growth slowing and new apartment complexes sprouting in every nook and cranny in and around Boone, the apartment rental gravy train may be halting on the tracks for, perhaps, the first time in decades.

Fulton Lovin, owner of the rental agency Pads for Grads, said, “Oh, yeah,” when asked if the rental market is saturated.

“Gosh, it’s probably been 40 years [since] there’s been a vacancy in Boone, and it’s going to get a lot worse, especially with all the units on 105 being built,” Lovin said. “So the party is over. We’ve had it good for a long time.”

Blythe Construction begins work on new road that will go to The Cottage’s of Boone. Photo by Paul T. Choate

The Capstone Collegiate Communities development called The Cottages of Boone is currently being constructed on Poplar Grove Road off of N.C. 105. The development is planned to have 894 bedrooms, estimated to cost $500 to $600 per bedroom, and should open before the fall semester of 2013.  

Add that to the potential 546-bedroom Clawson/Green complex on Perkinsville Drive and other smaller units being built, such as the two separate additions off of U.S. 421, and Boone is planned to have more than 1,500 new apartment bedrooms by August 2014.

In the past decade, the topic of market saturation wasn’t an issue when ASU grew at nearly a 25 percent clip – from an enrollment of 12,856 in 2001-02 to 16,023 in 2011-12. But with enrollment growth now slowing by more than one-third to 70 to 90 students a year, according to one official at ASU, and more housing options on campus, this could lessen demand.

Lovin said that demand will always exist for houses and apartments that are within walking distance to ASU or close by to the AppalCART. With 90 percent of Pads for Grads houses within walking distance to ASU, Lovin said that his management company isn’t having much vacancy issues, though he added that properties two miles away from campus are “lagging” and are more difficult to fill.

Jason Eldreth, owner of A Plus Realty, said his company hasn’t had any problems finding renters for his properties and the market isn’t saturated, yet.

“I don’t think so because right now it’s not been an issue. Basically, what’s happening is ASU has been increasing enrollment over the past few years,” Eldreth said. “I think we may see a little bit of a saturated market in the future with [Capstone and Clawson/Green developments].”

Eldreth added that the new apartment complexes that are up and running haven’t affected the landscape of the A Plus Realty’s rental house market because it caters to clients wanting to live out of town or to those that want to have pets. And he stressed that his company doesn’t solely focus on student rentals but also deals with ASU faculty and staff and the general public living in the High Country.  

In recent years, rental companies have been fighting the competition with deals to entice renters, such as all-inclusive rents featuring electricity allowances, free parking, reduced deposits and the “first month free” discount. Perhaps, lower rent costs will occur next as soon as the complexes currently being constructed come online.

Watauga County and Boone, in particular, is known for its high cost of living compared to other municipalities in the state. According to “Out of Reach 2012,” a study comparing wages and rents by the National Low Income Housing Coalition released in March, the fair-market rate for a two-bedroom unit in Watauga County costs $781.

This is the eighth-highest in the state, and the median income is significantly lower – an average of $12,000 less – than the other seven counties that are about $40-more expensive to reside in than Watauga County.

“The good thing [about a saturated market] is rents will go down,” Lovin said. “Boone and Chapel Hill are the highest in the state. But the good thing for students, inevitably, rents start the trend down as vacancy rates go up higher.” 

Rob Holton, who owns one of the biggest and most varied rental management companies in the High Country – Holton Mountain Rentals, said the area is experiencing a “soft market” cycle, one similar to 1986 when a number of new complexes were built in the area.

As for the new complexes coming on line in the future, Holton said competing with other companies will be a challenge.    

“It’s certainly going to make it more challenging,” Holton said, adding that certain Holton Mountain Rental units will feature incentives.

Most markets, Holton said, typically have a five percent vacancy rate – something that isn’t familiar in Boone.  

“Boone has not had that [5 percent vacancy rate] for a long time, but it’s overall probably approaching that,” Holton said.

Just has Lovin pointed out the lower rents as one positive to be gleaned from the saturated market, Holton said the good news in all of this is that tenants will have more options.

“Anytime you have a softer market, it’s important to try to give the best tenant service you can and offer the best product you can,” he said.