Real Estate Agencies

An apartment complex under development in Rancho Cucamonga that’s designed to resemble a boutique luxury hotel in Santa Barbara has generated a flurry of calls and visits from prospective renters although it won’t be leasing until next spring.

The project is part of an initiative by the developer, the Upland-based Lewis Group of Cos. to position itself for an apartment market that is taking strength in the wake of the for-sale housing crash.

Real estate experts say apartments with luxury amenities are attracting a wide variety of renters, from those skittish about buying a house when prices continue to fall to people who don’t have the credit or down payment to buy or who simply want a carefree lifestyle.

After suffering vacancies and rent concessions that were spurred by the Great Recession, the Inland apartment market is slowly recovering, with the greatest improvement occurring along the Interstate 15 corridor in western Riverside and San Bernardino counties, said Patrick Simons, founding principal of Strategic Property Economics in Laguna Hills.

Simons said “occupancies are very healthy,” averaging 96 percent in the nicer, newer apartments along the I-15 corridor. He said he believes the apartments in the region are doing exceptionally well, and much better than rental communities farther inland, because of the I-15 corridor’s recently reviving distribution and warehousing industry.

Apartment developments with the highest occupancies, Simons said, also tend to be those that offer three bedrooms, attached garages and other amenities more commonly found in for-sale condominiums and townhouses.

“There is a huge number of households that either now can’t qualify to buy or don’t want to buy because of economic uncertainty and are looking for a stable, well-maintained, well-managed, safe environment for their families,” Simons said.

Cutting rent concessions

Rising apartment occupancies along the I-15 corridor have enabled landlords to eliminate concessions of one to two months free rent that they were forced to offer in 2009, said Simons.

Cutting rent concessions translated into an effective rent increase of between 8 percent and 10 percent, he said.

But what would most encourage apartment investors, lenders and developers would be actual rent hikes, Simons said.

In anticipation of higher rents, apartment projects representing about 3,000 units are in the planning and financing stages, while another 1,500 apartments already are under construction along the I-15 from Murrieta to Rancho Cucamonga, he said.

Most lenders and equity investors are financing apartment construction in Los Angeles and Orange counties, areas that are doing better economically than Inland Southern California. But capital investors “will start to look east for new opportunities,” Simons predicted.

Corona projects

Projects moving forward in Corona include a 404-unit apartment complex at the location of a former Edwards Cinema on Rincon Street.

This, the first significant apartment project to be built in Corona in five years, is being developed by Watermarke Properties, a Corona real estate investment firm.

“I think it is still a risk to move forward. We are banking on things getting better,” said Greg Neville, Watermarke’s senior vice president of development. He noted that Inland Empire rents dropped about 20 percent from their peak in 2007 and only began to stabilize last year. “It will be a slow climb getting back up to those levels,” he said.

Still he said he is optimistic that Inland rents will continue to increase before leasing on the Corona apartments begins in July of 2012. He said the tenants also will pay a premium to live within a short walk of the Metro Station, so they can take the commuter train to jobs in Los Angeles and Orange County.

Also West Coast Development Inc. received approval from the city of Corona for a 459-unit apartment project on Foothill Parkway that is planned for three lifestyle options: family-style townhouses, walk-up apartments and a multilevel apartment building with elevators and subterranean parking. Amenities include a 10,000-square foot clubhouse, cyber café, swimming pools, tennis court, dog park and putting green. Leasing is expected to start at the end of 2013.

‘Like a resort’

At the Lewis Santa Barbara apartment complex in Rancho Cucamonga, “We try to marry the landscaping and architecture and very strong programming to make it like a resort,” said Randall Lewis, executive vice president of the Lewis Group of Cos.

The 192-apartment project under construction at the southwest corner of Church St. and Spruce Ave. will have “something for everyone,” Lewis said, featuring seven floor plans that range from one-bedroom apartments to three and four bedroom townhouses of up to 2000 square feet and with direct access garages. Rents are forecast between $1,500 and $2,500.

Lewis said the Lewis Group of Cos., which owns almost 8,000 rentals, more than half of which are in Riverside and San Bernardino counties, also plans to build 799 more apartments over three years at The Preserve master planned development in Chino, where he said the first homes probably will be available for rent in late 2012.

One reason that apartment developers are concentrating on building high-end apartments with such perks as granite countertops and upgraded master bathrooms, Lewis said, is that with the high cost of construction, land costs and development fees “it is the only way you can make a profit.”

Another reason is a change in renter expectations.

“Twenty years ago the typical apartment in the Inland Empire was one and two bedrooms, a starter without many amenities and designed for the market then that grew much more sophisticated and demanding,” Lewis said.