The changing housing market

The changing housing market

Supply of high-rise housing exceeds stagnant student demand

Housing Map

When Equinox first opened in August 2006, Madison Property Management rented out the entire building in one week. As of May 5, 2013, Equinox still has 28 units available for August 2013. Another MPM complex located at 420 West Gorham has 15 units remaining.

“People just aren’t as excited about those buildings, so we’ve been forced to adapt,” said Myles Tourtillott, the marketing director at MPM. “In the past, Equinox and 420 are one of the first to go. But this year we just had to make a few adjustments sooner and more frequently than we have had to in the past. It’s just different this year.”

Tourtillott said the company began lowering rates and altering its marketing strategies primarily for these two buildings.

MPM is not alone. Palisade Properties has sent out weekly emails advertising open units, one which said the company would give out “CASH for signing a lease” before a certain date. Hovde Properties is offering a free flat screen TV for any groups who sign for available units at 229 Lakelawn.

With two new MPM-run high rises, XO1 and Vantage Point, joining the market this August, there will be another 643 more bedrooms added to the student-oriented housing supply.

Additionally for August 2014, two more developments will be ready for renters: a 71-unit complex that will replace Stadium Bar and a 72-unit development called the Waterfront on Henry Street and Iota Court.

High-rise properties across downtown have been rented out consistently in recent years, largely due to an influx of young professionals moving downtown, notably employees at Epic, the growing health-care software company based in Verona.

With Madison maintaining one of the lowest vacancy rates in the country at 1.88 percent, coupled with the influx of new residents seeking luxury apartments downtown, lending institutions view housing projects optimistically and typically provide the capital for construction, according to city officials.

Provided the lending institutions deem a housing project worth investing in, the city government usually approves it, stepping in only when a project violates a city ordinance such as the zoning code.

“We shouldn’t be trying to regulate this market too hard,” said Ald. Scott Resnick, District 8, who has supported numerous downtown high-rise projects since his tenure began in 2011.

Now, Equinox, which was once the top of the rental market, has now moved into a spot where it reaches capacity slower than brand new buildings, which are competitively priced, and older buildings that are less expensive.

Lauren Peterson, UW-Madison sophomore and current Equinox tenant, signed a lease for Aberdeen for August 2013. Aberdeen, built in 2004, is more affordable than Equinox, two years its junior. At Equinox, Peterson pays around $630 for her own room in a four-bedroom apartment she shares with four others. Next year, with the same number of rooms and roommates, the tenants with their own rooms will pay approximately $600.

MPM has since sent Peterson and her roommates emails with rent reduction offers for resigning their current unit that remains unsigned for August. MPM is also advertising a moped give-away for anyone who signs before May 10.

Peterson said Equinox might be harder to fill this year, as nearby high rises such as Aberdeen advertise lower prices, combined with the fact that there are now high rises being constructed much closer to campus.

“At this point, [MPM has] to change their operating,” Peterson said.

A shift west

Historically, there have been more student-oriented, high-density housing options in the neighborhoods just east of campus—the first being private dorm-style housing, including Statesider, the Towers, Highlander and the abandoned “Langdon” at 126 Langdon Street. The Regent, the first student-oriented housing on the west end of campus, opened in 1965.

Massive efficiency buildings, such as Henry Gilman and Roundhouse, followed soon after at the turn of the 1970s. Development on the southwest end of campus, however, remained slow. The next major changes were the addition of the Spring Street neighborhood townhouses in the 1980s.

By the time Park Terrace West was erected in 2002, Palisade was being constructed simultaneously, and La Ville, La Ciel and Embassy were already built.

Today there are around 4,475 bedrooms in high density buildings on the “east end” of campus, compared to around 2,700 bedrooms west of Park Street, or the “west end.”

Although there is less to choose from on the west end, there has been a boom in recent years, with the construction of Grand Central and Humbucker. MPM’s west end properties rented out generally faster than their properties on the east end this year. Park Terrace West was the first MPM high rise to fill for 2013-’14.

As Union South and the Wisconsin Institutes for Discovery have become new campus hubs, student preferences could be shifting to the west end, according to Tourtillott, who speculated that units on the west end might rent faster because there are fewer of them, and less competition between them.

UW-Madison freshman Emily Orals said she signed a lease at Vantage Point, located near Union South, for August 2013 because it is new and a “prime location” for her classes.

“Although great places to stay, [the east end high rises] are not as close and convenient as those newer ones would be,” Orals said.

Historic campus shortage

Only a decade ago, UW-Madison had a University Housing shortage, which encouraged students to live across the city. Many out-of-state students were forced to seek other housing options, and private dormitories such as Statesider and the Towers served an integral purpose.

Next year, with the addition of what is currently called New Hall 32, located near Dejope Hall, UW-Madison’s residence hall capacity will reach 7,410. This will be the closest the university will be to housing all first-year students, according to Paul Evans, director of University Housing.

As University Housing reaches its highest capacity in history, student-oriented dense housing also continues to rise. There are three projects the City Council has conditionally approved- two projects on the east end and one mixed-use proposal on Dayton and Brooks streets. Additionally, there will soon be a proposal submitted for a redevelopment of University Inn into a student-oriented luxurious building, which Ald. Mike Verveer, District 4, said would likely outdo Lucky in amenities offered.

“Developer after developer reports to me that they strongly believe that Madison’s housing rental market can support all these new units coming on line,” Verveer said. “That the demand still exceeds the supply in the case of student housing ... it’s somewhat baffling to people because UW enrollment has remained stagnant for the last 20 years.”

However, the types of units young professionals often prefer are not the four-bedroom units that are often left unfilled near campus.

“It’s hard to market 4-bedrooms to younger professionals,” Tourtillott said.

The high-rise bubble

Verveer said increased competition among management companies is a net positive for student renters, with excess amounts of student-oriented housing available in May.

“Landlords are going to be dramatically reducing rents,” Verveer said. “It’s always been a pet peeve of mine that the student rental season has started so early. It’s actually pretty aggravating. If all that can be delayed, I’m all for it.”

As the trend continues, management companies will be forced to adapt to a market where students’ preferences will play a larger factor, creating competition between management companies.

“If we have trouble renting units it’s our fault,” Tourtillott said. “It’s not the markets’ fault.”

Still, Tourtillott added that student-oriented high-rise development has already gone too far, as units on the east end continue to sit on the market for next school year.

“Eventually you’d think that [the market] has to hit the bubble,” Tourtillott said. “I think it has already hit.”


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