Young adults drive home rental trend in Western Pennsylvania

David Alligood found a good fit in a small apartment when he transferred to Pittsburgh to supervise 12 regional stores for Target.

I live in a one-bedroom unit at River Vue, which is ideal for the amount of traveling I must do, said Alligood, 32, who wants to stay in the city where he has joined civic groups, runs in several races and enjoys the sports scene.

The North Carolina transplant fits into a trend that is driving an apartment building boom. According to data from the Census Bureau, builders nationwide broke ground on more apartment buildings during the past year than in any similar period since 1989. Higher home prices and mortgage rates are pushing young adults to rent instead.

In Pittsburgh, construction of apartments cooled off during the first six months of the year. New permits dropped by 50 percent from 2013, partly because of the severe winter, according to Ross-based research and consulting firm Tall Timber Group.

But demand from the key demographic young adults remains high, developers say. Investors, especially from out of town, are putting money into converting and upgrading apartments here to capture their business. The competition among young adults who see apartment living as a more affordable and flexible option than buying a home is pushing prices higher.

Landlords are not providing rent concessions. Rental rates are increasing 3 to 5 percent annually compared to 2 percent in the past. There has been high-paying job growth here, partially because of Marcellus shale, resulting in high rental rates a lot of newcomers to this region can afford, said Cindy Kamin, a commercial real estate broker with CBRE.

The increasing number of young professionals making Pittsburgh home are doing so in newer, trendy apartments that fit into their lifestyle, and developers are quickly looking to cater to that growing demographic. Oxford Development Co. has two projects under way, primarily aimed at renters age 25 to 34, said Shawn Fox director of development.

About 60 percent of the units are either studios or one-bedrooms because traditionally, these tenants do not spend a lot of time in their apartments, said Chuck Hammel of Pitt-Ohio Trucking, a partner with Oxford in the $60 million, 300-unit Three Crossings development set to open next spring in the Strip District.

Oxford's other development is the 117-unit Hot Metal Flats, a $24 million to $26 million development, set to open next spring in the South Side.

That 25-to-34 crowd is less interested in buying homes as they come out of school with heavy debt, fearful of a big mortgage, Kamin said. Some have not started their own families and don't view owning a house as a necessity.

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Young adults drive home rental trend in Western Pennsylvania