During the last month, eight single-bedroom apartments that had been rented to college students in Providence through RentProv Realty had the students back out of the deals. And there were more multi-bedroom apartments in the same situation.
The reason: a tough economy and students who could not afford to come back to school, RentProv owner David Peck said last week.
“They just weren’t getting student loans or they couldn’t get a summer job – they just couldn’t afford to come back,” Peck said, describing conversations that he had with the would-be renters.
“We have never seen that” in Providence, he added. “Then, the other thing, there was a mad scramble in the two- and three-bedroom apartments where one student” wasn’t coming back and the others couldn’t keep the rental they had signed a lease for.
His inventory is growing quickly enough that he cannot keep up. Last year, RentProv Realty had about 70 apartments listed during September. This year, there’s about 200. RentProv Realty now has four full-time employees working out of its Atwells Avenue office.
“But if we had 50 agents, we still couldn’t rent any more apartments,” Peck added.
Peck, a Realtor, fears the broken deals are harbingers of the future of the Providence rental market. Gabe Francis, who founded RentProv and sold off his interest to Peck last year, has the same concern.
But it’s not just students, Francis said. The growth in inventory for high-end rentals – coupled with rising energy costs – has been pushing the apartment inventory in Providence upward for a few years.
And now, with the state in an economic funk and job counts lessening by the quarter, Francis – who operates the independent Rentprov.com – is seeing an even steadier rise in inventory, he said.
On Rentprov.com, the average daily inventory has grown from 300 to 1,100 apartments in a year. Some of that, he said, is from a growing interest in his Web site. But he also monitors activity on the Craigslist.org rental site for Rhode Island. There, he’s seen an increase from about 400 postings a day this time last year to about 750 postings a day now.
“There’s been a massive buildout of apartments and all those apartments are nice because they’re new,” Francis said. “And there are condos. And those condos aren’t selling, although each day there are condos coming onto the market. So what we’re seeing in the condo market is going to get a lot rougher.”
Although Francis is quick to acknowledge that his opinion is based mostly on sales and traffic that come through his Web site – and his conversations with Realtors and area developers – he believes the Rhode Island market is undergoing a big change. The large developments like Rising Sun Mills, Hope Artiste Village and many others aren’t going to continue to be supported by Providence’s economy, he predicted. That’s why many projects that were planned as condos are now being rented as apartments – including Waterplace Towers, Francis said.
“But all these higher-end rentals are entering the market and they’re all competing for a tenant that doesn’t exist,” Francis said. “They’re competing for this person who rents between the $1,500 to $2,500 range. Is there such a person? Absolutely. But is there enough to fill all these buildings? Not a chance.”
According to HousingWorksRI, the median price of renting in the city has been rising – for a two-bedroom rental the costs jumped 9.9 percent between 2004 and 2007.
So couldn’t the increased inventory drive down rental prices?
Sure, Francis said, but then there’s the rising cost of oil, which will affect heating costs this winter. “I think this winter is going to be the most challenging winter that landlords have seen in years,” he said. “Higher oil prices, when it comes to filling up your tank, is going to kill the low-end market.”
At the Rumford Center, the 80 apartments that are about to come onto the market in East Providence, the developers made a decision during construction to reposition the units. Many of them had originally been proposed as condos.
And Kirkbrae Development President Greg Richard said last week that his company and partner Peregrine Development are still deciding whether to build an 8,500-square-foot building that could have townhouse-style condos. The original plans also called for a four-story condo building on an adjacent parcel.
“But that’s up in the air,” Richard said. “The condominium market isn’t that good right now so we’d hold off on that until we see things improve.”
For Francis, improvement in the market would mean a lowered inventory. And that could depend on reduced heating fuel costs, he said.
“I can’t tell [how long it will take to lose the inventory] because I don’t know what the oil prices are going to be,” he said. •
