If you take a drive around Lawrence this weekend, you might notice more “For Rent” signs than you’d expect to see in August.
Even prime spots for students have rooms for rent.
“This will be my first year that I’ve had a vacancy,” said Quinn Miller of Second Wind Management. “It’s been an odd month.”
Miller has been managing properties in Lawrence since 2007 and noticed last year the renter pool seemed smaller. Then, he didn’t fill his last spot until July 31. This year, Aug. 1 has come and gone and he has yet to fill five of his 37 spots.
Last week in the neighborhood north of Memorial Stadium, where Miller still has a house to fill, there were seven “For Rent” signs in the 10 square blocks from Sixth and Illinois streets to 11th and Maine streets.
No one knows exactly how many rental vacancies Lawrence has because property management companies are reluctant to reveal those exact numbers. But real estate appraiser Tim Keller conducts an annual survey of property owners to try to find out.
“My estimates have shown the vacancy rates range from 6 to 10 percent depending on the part of the city,” said Keller, who has not yet released the results to this year’s survey.
That fits with the most recent estimates from the U.S. Census Bureau, which pegged Lawrence’s 2009 rental vacancy rate at 6.5 percent, with about 2,400 of the 37,900 rental units vacant. That’s actually lower than the 7.7 percent rate for the entire state that year. Nationally, the rental vacancy rate dropped to 9.2 percent in the spring, the lowest it’s been since 2004.
For landlords like Miller, lower student enrollment may be contributing to his unoccupied rooms. The head count on the Kansas University’s Lawrence campus declined by 600 from fall 2008 to fall 2010. KU’s latest enrollment numbers have not been released.
For landlords who cater to students, the decline has been felt.
“It’s been a lot of wait-and-see,” Miller said.
There are also more apartment units. Since 2008, 997 apartment units have been built in Lawrence, with 55 built so far this year.
Tuckaway Apartments at 546 Frontier Road were completed in the spring, replacing the Boardwalk Apartments that burned down in 2005. Since becoming fully operational in June, about 35 percent of the 96 apartments have been leased.
Other projects in the works include a seven-story, 55-bedroom building on the corner of Ninth and New Hampshire streets and a 300-apartment complex on Sixth Street and Queens Road.
It might sound odd that there’s so much development in a town where there are more rooms for rent than there are renters. But for investors, it could make sense to build now.
“Construction costs will probably never be any cheaper,” Keller said. “Financing is not easy to get, but the interest rates are favorable.”
And while there are vacancies, Lawrence’s population did grow by more than 1,000 from 2006 to 2010. That growth may give investors the confidence that building now could pay off later.
“While there’s vacancy, there’s also growth the market can stand,” said Ted Haggart, president and CEO of Douglas County Bank. “There is never going to be zero vacancy.”
He said developers who build now may be able to sell their holdings down the road for a big payoff. That happened last December, when a New York-based company purchased two of the three Hawks Pointe apartments at 1421 W. Seventh St. for $12.4 million. The apartments had been owned by a Massachusetts-based company since 2004.
“Apartments are still a favored property to own nationwide,” Keller said. “That probably accounts for some of that significant investment from out of state.”
For landlord James Dunn, who still is trying to fill some of his properties, that development perplexes him. He is concerned the Lawrence rental market has become overbuilt.
“I do have places that really should have somebody living in them. A lot of them are fixed up with new things,” Dunn said. “I feel like I’m personally creating museums.”