City rental rates seen rising

City rental rates seen rising

May 18th, 2011 by Mike Pare in Business Around the Region

HOT CITIES

Top 10 metros where rents are rising:

1. San Jose, Calif., 6.8 percent

2. New York, 6 percent

3. Washington, D.C., 5.4 percent

4. Greenville, S.C., 5 percent

5. Portland, Ore., 4.8 percent

6. Chattanooga, 4.7 percent

7. Orange County, Calif., 4.6 percent

8. Houston, 4.4 percent

9. Seattle, 4.3 percent

10. Hartford, Conn., 4.2 percent

Source: U.S. News & World Report, metro areas and the projected 2011 rental rate increases

Chattanooga is among the nation's 10 hottest metro areas where residential rental rates are expected to jump in 2011, according to U.S. News & World Report.

Average Chattanooga rents, currently at $659 a month, are projected to rise 4.7 percent - the sixth-highest increase of any area this year, research from the real estate data firm REIS Inc. shows.

San Jose, Calif., New York and Washington, D.C., are also on the list. Greenville, S.C., and Houston are the only two other cities in the South.

The study cites the start of production at Chattanooga's Volkswagen auto assembly plant as well as other business which have kept unemployment below the national average. It also noted Chattanooga has a low cost of living at the outset.

Chattanooga developer Bob McKenzie, whose company owns Frazier Place apartments on the North Shore, said rents are up and he has had more unsolicited requests recently than at any time in the last three years.

"We've got a lengthy waiting list at Frazier Place," he said.

Karl Sodergren, owner real estate and auction business FirstCommerce.com, said his units are 100 percent occupied with little attrition.

He cited factors such as home foreclosures, people not being able to qualify to buy a house and a recovering economy. He mentioned the presence of companies such as VW, Amazon and Wacker.

Rising rents are seen as a positive economic indicator because they could signal a pickup in home purchases in the near future, experts said.

Jennifer Grayson, a real estate broker for Fletcher Bright Co., said rising rents may push some people off the fence to buy, which would be a plus for the housing market.

"We have a good class of renters right now," she said, noting some are choosing to do so because of lifestyle.

McKenzie, who is in a partnership to build apartments off Walnut Street downtown, added that group hopes to break ground this summer.

REIS reports the average increase in rents this year is expected to be 3.6 percent nationally.