Today we’re going to be discussing the Olde Town Rental market update. Click here to download the Rental Study.
Overall, we’ve seen the rental rates in Olde Town (Downtown Augusta’s primary residential neighborhood) climb from an average of $.67/SF to just under a dollar per SF over the past four years. That’s a 32% increase, about 8% per year. What’s going on?
Well, as we’ve already mentioned, Cyber and Medical young professionals are choosing to live downtown. That’s driving up rents and housing prices. Also, investors are renovating properties, and so we are seeing more available rental properties that are in in decent condition.
A decent case study is 107/105 Fourth Street. We recently helped a buyer from Virginia acquire those apartments. The previous owner had owned them for over 15 years, and they were in pretty rough condition with low rents. The new owner is going to make an investment into renovating the units, and with the help of professional property management, they will lease them at market rates. The location of the property is great–the condition was terrible. Now that complex (surrounded by young, professional homeowners) will probably target young professional or medical tenants, and we’ll see it on our rent study next year, my guess is on the higher end of our graphs.
You’ll also see in the graph a strong correlation between the “Score” and the price per foot. Our scoring system is a somewhat arbitrary numbering of properties by both location and condition from 1 to 5, and then averaging these two numbers together. Thus, a property with location of 4 and condition of 5 scores a 4.5 in this measure. The number again is somewhat arbitrary, but the correlation is quite strong. So I would assign a property in rough condition and poor location an estimated rental rate of .65/ft, while a property with a good location and great condition an estimated rental rate of .95/ft. Note that this measure doesn’t take into consideration size, which the first graph makes clear is highly correlated with the rental rate.
I think this is great news for our Downtown rental market. Augusta is changing, and I believe that the rising tide will lift all ships.
What are your thoughts? What has your experience been in the rental market?