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Charlotte-area contractors repair profits with apartment upgrades

Landlords sprucing up units in competitive rental market

Kevin Higgins is a busy guy.

Higgins, a Charlotte contractor and owner of THS National, and his employees have been working hard all spring and summer.

But they aren’t building homes; not many contractors are, thanks to the housing market slump.

Instead, companies like Higgins’ are enjoying an uptick in apartment renovation work, a welcome development for those in the construction industry at a time when not many new projects are taking place.

“We’ve worked for Simpson Housing, Aubrey Home Apartments, Brookside Residential and here at Camden where we are doing Camden Ballantyne and Camden Stonecrest,” Higgins said, ticking off names of apartment communities in the Charlotte metro area. “It has been great for us.”

The boom in apartment renovations in and around the metro area can be attributed to a renewed interest in renting rather than owning a home. Across the U.S., confidence in homeownership has fallen for many who have watched housing values plummet in the Great Recession. Such leeriness — as well as the inability for many to get loans to buy homes thanks to tougher lending requirements — has pushed many toward renting.

That has resulted in a highly competitive rental market. To stand out among the throngs of potential renters, apartment managers are turning to construction firms to make their properties stand out.

“It is updating the units and making their value increase. It is called a reposition,” Higgins said. “We are helping them offer a more modern look.”

But all of that renovation comes with a price.

Prices for rental apartments are expected to rise nationally, by approximately 4.5 percent in 2011 and up another 3 percent in 2012, according to rent.com. The average national rent is about $1,360 a month. In Charlotte, the average rent for a one-bedroom apartment is about $700 a month.

Rising rents could end up backfiring on enterprising apartment managers, said Ken Szymanski, executive director for the Greater Charlotte Apartment Association and the Apartment Association of North Carolina.

“Owners want to get a competitive edge over neighboring properties but at the same time have to be careful not to over improve for the market and what the consumers will pay for,” Szymanski said.

Landlords must ask themselves if it is worth modernizing or even giving a property a facelift if it means pricing units out of the market. In other cases, the decision to renovate is almost a no-brainer.

“Sometimes, the sheer obsolescence of old wood siding and decks make renovations essential,” Szymanski said. “For example, Woodscape Apartments in east Charlotte is replacing old wood siding with a composite material that does not warp or rot.”

Renovations of apartments in the area are coming in a variety of shapes and sizes and with various objectives.

“At Aubrey Home Apartments they completely redid the outside of their apartment complex,” Higgins said. “At Laurel Walk we repainted the exterior. Doing work for Camden is renovating the inside of the apartments.”

Kitchen fixtures and appliances were being hauled out and replaced at both properties owned by Camden Group, which came as no surprise to Szymanksi.

“My sense is that there is a fair amount of renovating going on these days, albeit of a broad range of types, purposes and per-unit costs,” he said. “Kitchens and baths often are the target for upgrades.”

For Higgins and his team, that means a pile of old appliances is slated to be disposed of, leading to an unintentional side effect of apartment upgrades.

“As they are changing out all the appliances, we are trying to get these old appliances and donate them to Crisis Assistance Ministries because they look for appliances all the time,” Higgins said.

The renovation boom has helped Higgins create some jobs for his construction company.

“We’ve been able to put on 20 more staff members,” he said. “We are now at 35 workers nationwide. Over the course of two years some of (these construction contracts) are worth $1 million, and some others are like $4 million. It has been great for us.”

Higgins said landing apartment renovation work from Camden was like catching the crest of the wave.

“Camden really started the trend, I think,” he said. “And we started with them in early spring 2010. The (two projects) for them will probably be done by about the end of 2012 or middle of 2013.”

Higgins refused to disclose how much his company was being paid by Camden.

The renovation jobs seem to keep coming for Higgins now that word has spread and the trend has started to take hold. He said most apartment managers in the Charlotte area saw the new digs in places like Camden Ballantyne, the first units of which were renovated earlier this year, and decided their own properties could use some sprucing up.

“A lot of companies were going to do renovations a few years ago but put them off,” he said. “But they want to make sure that this trend continues.”

THS National put in bids with many more Charlotte-area apartment owners, some of whom have deferred the work until next year. Such projects could lead to what Higgins said is the lifeblood of contractors: a referral for more work from Camden.

“They (Camden) are adding in other properties and they’re looking at adding properties every day,” Higgins said. “They are doing four in Atlanta and one we’re doing for them in Raleigh, and they are looking at doing two in D.C. We’re supposed to take a look at the D.C. project later this month.”

Baughman can be reached at scott.baughman@mecktimes.com.

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