Apartment Renovations Should Factor In Economic Forecast Data, Too by Lew Sichelman
While much is made of housing starts and new construction, upgrading existing structures, especially apartments, is the often the only way to improve the quality of housing in existing neighborhoods. In 1998, the last year for which information is available, expenditures for capital improvements on multi-family structures totaled $10.3 billion, according to data assembled by the National Multi-Housing Council. That's about 42 percent of the $24.5 billion spent that year to build new apartment and condominiums. And with the average age of the nation's apartment stock at 34 years and climbing, the pace of upgrades made by owners and landlords is expected to increase over the next decade, says NMHC President Jonathan Kempner. "This new research suggests that renovating and improving the nation's 17 million existing rental apartments will likely be one of the multi-family industry's major business opportunities in the coming years," says Kempner. Judging from most recent experiences, about one of every three apartments is upgraded every year, and seven of ten are improved over a 10-year period. Also, properties more than two decades old are much more likely to be improved. Based on these figures, NMHC believes some 5 million apartments are likely to receive some work over the next decade. But these are projections, the trade group points out, not predictions because they assume that the same amount of activity will take place. And "that may or may not turn out to be the case," it says in a new report. "If consumer demand for apartment living increases, the projections will prove to be too low." Nevertheless, the estimates should be close enough for reasonable baseline planning, Kempner says. Full make overs are relatively rare, the report says; most improvements are less dramatic but more frequent. On average, owners spend $1,262 per unit on improvements. But not surprisingly, they spend more on older units than on newer ones -- $1,329 per apartment in properties built prior to 1980 vs. $776 for units build in 1980 or after. About a quarter of the improvement jobs cost less than $125, but a similar 25 percent cost more than $2,500. When they undertake improvements, landlords tend to make more than one at a time. On average, they take on two. But the two most frequent -- kitchen make overs and bathroom renovations -- are also two of the most expensive. The next most common improvements are heating upgrades, adding or updating air conditioning, and plumbing replacements. | 
