Rental Royale

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.”

Union Wharf

Location Fells Point
Number of Units 281
Average rent $2,355
Highest rent$3,215

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.

Spa Cove

Location Annapolis
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.

The Crescent

Location Fells Point, Baltimore
Number of Units 252 units
Average rent $2,426
Highest rent$4,000

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.

The Eden

Location Harbor East, Baltimore
Number of Units 270
Average rent $2,244
Highest rent$3,130

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.

The Fitzgerald

Location Mt. Vernon, Baltimore
Number of Units 275
Average rent $1,901
Highest rent$2,542

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
Highest rent$2,520

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.

Spinnaker Bay

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.

The Zenith

Location West Side, Baltimore
Number of Units 191
Average rent $2,077
Highest rent$4,650

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)
Highest rent$3,415

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.

Dorsey Ridge

Location Hanover
Number of Units 323 mid-rise apartments; 238 villas
Average rent $2,000 for two-bedroom
Highest rent$2,975

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.

Mariner Bay

Location Annapolis
Number of Units 208
Average rent $2,320
Highest rent$3,745

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.