SALT LAKE CITY — Finding an apartment in the Salt Lake Valley is not as easy as it once was, or the bargain it use to be either.
A report released last week shows that the average cost of renting an apartment climbed for the sixth consecutive year and vacancy rates are at the second lowest in 15 years. The costs are being driven by demand from young professionals who want to live closer to downtown in a more urban environment.
“I like being where all the action is, enjoy the night life and be able to walk to places,” said Connor Reese, a 24-year-old technology professional who shares a two-bedroom apartment in the Avenues area of Salt Lake City with a roommate. “I’ve just always liked downtown.”
He likes it so much that he is willing to commute about 35 miles daily to his job in Utah County. Despite the low vacancy rates in the market, he was able to secure a suitable place in relatively short order after launching his apartment hunt, he said.
“I looked for about a month. It was actually pretty last minute,” Reese said. “We looked at a few places and we found a place on First Avenue that was a good option and ended up deciding on it.”
They located a two-bedroom, one bathroom, 535-square-foot unit for $1,060 per month that had been recently renovated.
“I realized there would be some sacrifice in space, but I feel like we got a pretty good price for (where we’re living,)” he said. “If I were to live anywhere else, there would be much more space and perhaps more perks." But he said being close to downtown was worth the trade-off.
That attitude has helped boost both demand and the cost to rent in the downtown area, a new report stated.
Commissioned by real estate firm Cushman & Wakefield Commerce and authored by James Wood, Ivory-Boyer Senior Fellow at the University of Utah’s Kem Gardner Policy Institute, the Apartment Market Report for the Greater Salt Lake Area showed that the rental housing market is as robust as it has been in years.
Wood said that the July 2016 vacancy rate of 2.9 percent was just above the record low of 2.7 percent reported in July of last year. This year also marked the fifth year in a row that vacancy rates were below 4 percent, he said.
He noted that a 5 percent vacancy rate is considered the equilibrium or “natural rate” for a strong rental market. The scarcity of available units combined with an increase in the volume of new rental apartments is putting upward pressure on rental rates, Wood said.
“In the past year, rental rates have increased by 4.6 percent,” he said. “The combined average for all types of units is $949. The average for a two-bedroom, two-bath unit is $1,085; and $1,244 for a three-bedroom unit.”
Also of note is the hike in rental rates for studio units, which jumped 10.5 percent from 2015 to this year, the report stated. In 2011, the average monthly studio rental rate was $515, today it has climbed to $705 — up nearly 37 percent.
“Affordability is a huge issue,” Wood said. “If you want to live downtown, you have to be able to afford the new (units) that are coming on and you probably have to have a roommate or two.”
He said that the number of rental units near downtown is expected to double by 2020.
“There seems to be lots of demand for people to live downtown,” Wood said.
Small home trend
One developer is hoping to address what he believes is a demand for smaller living space in urban areas that has been a growing trend nationwide. Prompted by the “tiny house” or small-house movement — an architectural and social drive advocating simple living in spaces typically under 500 square feet — developer Steve Ruf of Ruf and Associates in Orem has broken ground on 60 units of micro-apartment housing in the Central Ninth neighborhood of Salt Lake City directly across from the 900 South TRAX station.
When completed, Greenprint Apartments will include two four-story buildings that house 30 units each with 250 square feet to 350 square feet of living space, a bathroom and a kitchenette. Rents will range between $700 and $800, explained Ruf.
“It’s affordable (for new housing) because of the price point,” he said.
He said the idea to develop the micro units was born following a visit to Seattle and Portland in the Pacific Northwest where such housing options have worked well, particularly in cities where housing costs are higher than average. He also saw similar units in Des Moines, Iowa.
“We thought, ‘Wow, this could work really well in Salt Lake especially with what is going on with the housing market here,’” Rud said, noting the increasing demand for affordable apartments by the younger demographic.
“We’re trying to attract professional, millennials, people who want to have a small (environmental) footprint and who don’t necessarily want or have cars,” he said. These are people who want a more urban lifestyle, he added.
One local analyst said the increase in rents, high demand and low vacancies is proof that the local apartment market is “vigorously robust.”
Kip Paul, executive director of investment sales for Cushman & Wakefield Commerce, said there are thousands of rental units planned for the Salt Lake Valley over the next several years, which indicates that developers are confident about the trajectory of the area rental market.
“The market is surprisingly well-balanced,” he said.