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Room to rent. Despite hot condo market, realtors and analysts say demand for apartments in Greater Boston remains steady. The Boston Sunday Globe—August 28, 2005
At the new apartments at University Park in Cambridge, your money can get you walk-in closets and KitchenAid appliances, concierge service and wireless cafe access. What you won't have is a mortgage.

But Lauren Paton, regional manager for Forest City Residential, which is managing and marketing the complex, believes there are those customers who want both the luxury level "condo finishes" and the flexibility of a rental unit.

"Not everybody wants to buy," said Paton.

Despite sustained low interest rates and a steadily increasing stock of condos, realtors and analysts say demand for apartments in Greater Boston remains steady. Even though rents have begun to climb, they aren't as high as they were about five years ago, meaning that renters can still find deals. Some analysts expect a strong economy and improving job market to keep the housing market chugging along. But concerns about a so-called bubble may be making prospective buyers cautious, prompting them to remain renters until it becomes more clear if prices are poised to fall, some landlords said.

Meanwhile, competition has prompted landlords to upgrade their properties and some still offer breaks on fees and rent to entice a tenant pool that includes students, empty-nesters, the newly single, and those with credit problems.

Tom Meagher of Acton-based Northeast Apartment Advisors Inc., which tracks rental housing, said the market still favors renters, but is beginning to tighten. Based on a survey of roughly 16,000 units in Boston, the average rent is $1,684, up from $1,654 earlier this year. Across Greater Boston, average rents showed a small uptick this spring for the first time since 2002, Meagher said. (Although his reports only date back to 2002, he believes rents have actually been in decline since 2001.) Occupancy is up to about 97.5 percent, and fewer properties are offering inducements such as a free month's rent. Three apartment buildings under construction in Boston—Trilogy, Park Essex, and Park Lane Seaport—are expected to add almost 1,300 rental units to the market. Those developments represent the first significant addition to the market in several years, said Meagher.

Property owners say the growing number of investors converting apartments into condos hasn't had a noticeable effect on demand. Allen Hebert, Web master for the Massachusetts Rental Housing Association, owns about 12 properties in Cambridge, Somerville, and Waltham. After a drop in tenancy forced him to drop rents in some of his units by $100-$200 three years ago, he has seen them stabilize or increase over the past year.

But Hebert also said many landlords have been hurt by the soft market. Even though rents are moving up, landlords are becoming frustrated by rising taxes and expenses like insurance and utilities, and are considering cashing out.

Virginia-based AvalonBay Communities Inc., has 4,000 apartments in Massachusetts, and about 1,800 more in the pipeline in Chestnut Hill, Bedford, Danvers, Woburn, Shrewsbury, and Lexington. The company tries to build near retail, transportation, and job centers, said William McLaughlin, senior vice president of development.

About four years ago, the company began slashing rents by as much as 20 percent and covering some months for free to entice tenants, McLaughlin said. But the market has since turned around, he said, largely because of job growth taking hold in the state.

"That really is the engine that drives demand," he said.

AvalonBay tenants tend to be in their late 20s or early 30s, McLaughlin said, and for many it's their last apartment before they buy a house. But because of growing hesitancy about the strength of the housing market, he also said the company is no longer seeing tenants leave in droves to buy.

Price is still an obstacle to buying a house, particularly among recent college graduates. Keri Callahan, a 24-year-old editor, said she hopes to buy when she can afford it. For now, she lives with a roommate in an apartment in Brighton.

The two knew what they wanted when they began their search this year: a two-bedroom with parking that would accept pets. They began looking in Brighton and South Boston for apartments in their price range, which was around $1,300 per month.

Callahan, a graduate of Northeastern University, said they eventually found what they wanted. She noted that the process of finding an apartment always tends to be a struggle, but said landlords seemed to be less strict about things like security deposits and fees than they were when she and her roommates were students.

"I see them being more flexible with young professionals," Callahan said.

College students will always create demand for apartments in Boston. But John Conroy, owner of East Coast Realty on Commonwealth Avenue in Allston, said students can now be choosier about their living arrangements because they do not always need several roommates to make ends meet.

Although he still sees the occasional one-bedroom unit rent for more than $2,000 a month, Conroy said one-bedroom apartments in the Allston-Brighton area tend to go for $1,100 to $1,200 a month, down from $1,400 to $1,500 in previous years. Landlords also are updating kitchens and bathrooms, recognizing they can no longer command high rents for run-down properties, Conroy said.

Bill McQuillan, a principal with Boylston Properties, which has partnered with Samuels and Associates to develop Trilogy, believes many renters are interested in more than just an updated unit. They want something brand new, with amenities like elevators, fitness centers, concierges, and kicked up common areas.

"The 42d layer of paint on the walk-up apartment has lost some of its charm," McQuillan said.