With the apartment picture in the Salt Lake area showing signs of stabilizing, the news is especially welcome to Bruce Malcolm, a commercial agent for Gump and Ayers Real Estate Inc., who specializes in selling apartment complexes.
"The excess supply has now been absorbed and the market has stabilized," said Malcolm, while receiving congratulations for finishing 1990 with $7.6 million in apartment sales, a 152 percent increase over his $3 million in sales in 1989.He was involved in 21 apartment transactions in 1990, which had a total of 477 units with an average cost of $15,830 per unit.
One of only five Utahns specializing in apartment selling, Malcolm got into real estate after graduating from Claremont McKenna College, Pomona, Calif., in 1979 with a bachelor's degree in history and a minor in economics. He came to Utah because his family was located here and started working for Commonwealth Equities, specializing in apartments.
In 11 years he has sold only two houses, something he considered "bad experiences" because "I didn't know where to begin." He worked for Vantage Income Properties for three years before going with G&A in 1987 to be the apartment specialist.
The past 15 years in the apartment business has been a roller-coaster ride, Malcolm said.
In the late 1970s, the apartment market was fueled by inflation and "apartment selling was a wild business." He said people purchased apartments on speculation hoping to take advantage of high prices to make a profit. Money lenders were eager to loan on this type of construction and the result was overbuilding about 1984.
A good example is the large number of apartment complexes that emerged on 3900 South between 700 West and 1300 West. There were other areas where the same thing happened.
With the glut of apartments came the offer of amenities to attract renters. Hawaiian vacations, microwave ovens and low rents were used to fill up the hundreds of new apartments. Malcolm said studies have shown that amenities attract people to an apartment complex, but the hot tubs, spas and swimming pools aren't used that much.
Malcolm said there is a "pent-up supply of apartment owners" who failed to sell their buildings in their quest to make a quick profit during the high inflation times, and there are others tired of being landlords. He said there is a fairly good supply of apartment buyers.
With vacancy running between 5-10 percent and contractors not building apartment complexes on speculation, it seems as though all sizes of apartment complexes have found their market niche, Malcolm said. He believes that low vacancy rates, coupled with little new apartment construction will drive apartment rates up.