Megan Berry, a freshman transfer student at the University of the Arts, had been searching for an apartment since February, but couldn't find one she considered reasonably priced

and

in a safe neighborhood.

"You either find something that is small and high-priced or low-priced but doesn't include utilities and [is] in a neighborhood that isn't very safe," Berry, 22, of Cranford, N.J., said.

Sales of houses continue to cool throughout the Philadelphia region. But the residential rental market is heating up in the city and the suburbs.

"There was a big seasonal pickup in units rented in April," said Joanne Davidow, manager/broker at Prudential Fox & Roach's Rittenhouse office, acknowledging that newly constructed buildings might be "padding" the number of available spaces.

Still, area agents say, demand for apartments, luxury and otherwise, is much stronger than usual - so much so that Center City landlords, especially in more desirable locations, can dictate price.

"I've been showing units that haven't been upgraded in many years that are commanding big rents," said John Featherman of Prudential Fox & Roach.

In March, existing-home sales in the eight-county metropolitan area fell 32.8 percent from the March 2007 level, according to Prudential Fox & Roach's HomExpert Market Report, which is based on data from Trend multiple-listing service.

A byproduct of weakening local sales is the rental boom, market observers said, as people who would have bought houses or condos here two years ago wait things out.

The situation contrasts with the vacancy rate nationally for rental apartments in buildings with five or more units - 10.7, unchanged from a year ago, according to the Census Bureau.

"Rental vacancy rates have consistently been less than 11 percent in mid-decade," said Michael Tucker of the National Multi-Housing Council in Washington.

In 2006 and 2007, the vacancy rate for the eight-county Philadelphia area was about 4 percent and has been below the national rate for most of the decade, according to Spencer Yablon, corporate-affairs manager in Philadelphia for Marcus & Millichap Real Estate Investment Services, which tracks apartment supply and demand and rental-price trends nationwide.

In this region, there are two rental markets, the suburbs and Center City, Yablon said.

Suburban demand here is strong, Yablon said, but "there aren't a lot of multifamily projects under construction because municipalities are not eager to approve them and construction costs are high."

Developers are expected to complete 1,300 rental apartments regionwide in 2008, a 0.7 percent increase in the rental-apartment stock, he said. Slower job creation will lessen demand the rest of the year, Yablon predicted, and the vacancy rate will tick up from about 4 percent to 4.2 percent.

But in Center City, Yablon said, there is a "shadow rental market," with some condo developers renting units until the for-sale market revives.

As an example, he cited Waterfront Square, where Isle of Capri Associates is building the third of five planned residential towers.

Rents range from $1,500 for one-bedroom units to $2,500 for two bedrooms and include parking for one car, said George J. Cahill, an associate broker with Coldwell Banker Realty Corp., who handles rentals at the complex.

Registered nurse Elena Rossman recently rented a one-bedroom at Waterfront Square because "it is much cheaper to rent right now. The prices are just more than I can afford, so I will wait."

When she buys, she will look for a townhouse similar to the one she sold two years ago in Bucks County.

"I like Waterfront Square, but I'd want a townhouse again," she said.

Marcus & Millichap predicts the region's asking rents will increase 4.5 percent, to an average $1,051 per month this year, while effective rents (without incentives such as moving assistance) will rise 4.4 percent, to an average $1,014 per month. Rent growth in Center City and Montgomery County is expected to exceed those averages.

Among those being shut out by higher rents are college students. Although a recent survey by Apartments.com and CareerBuilder's CBCampus. com recently called Philadelphia the most affordable city for young college graduates, the same cannot be said for those still in school.

Berry, the student, started looking with other people, but over time it dwindled to just her, which made security and proximity to campus just as important as price.

"It's been a long and difficult process," Berry said. "You have to balance rent with art supplies and other expenses, and that's a stretch." She said Friday that she settled on a Center City apartment about a week ago - after a three-month search.

Barbara Elliott, dean of enrollment, said the university was finding that students who seek off-campus housing were going farther and farther out of Center City.

Rittenhouse Square is always a sure bet for top-dollar rents and sale prices. Home purchases there boosted Center City's median condo price consistently throughout the slower winter months.

"The market segment that isn't buying is renting, so that's making rentals tighter," said Allan Domb, president of Allan Domb Real Estate, who owns buildings there.

April was his best rental month ever, he said. "We will rent 20 percent more homes than last year," about 60.

Larry Cohen, who relocated here from New York for a job, is renting a studio apartment at the Metropolitan at 15th and Arch Streets for about $1,200 a month, until he figures out the city.

"The one thing you immediately notice is that prices in Philadelphia are almost half Manhattan's," said Cohen, 55, who will divide his time between Center City and the Greenwich Village co-op where he and his wife have lived for 33 years. "You couldn't get a one-bedroom for under $3,000 in Manhattan, and three bedrooms start in the high $4,000s."

At Symphony House at Broad and Pine Streets, some investors' units are renting from $2,900 for a one-bedroom to $6,000 and up for a three-bedroom. Davidow said she recently was the agent for a 1,405-square-foot, two-bedroom/two-bath unit with a small den and a one-car garage renting for $4,200 a month.

Some Symphony House buyers were forced to rent their condos when they weren't able to sell their suburban homes for what they needed to cover the new mortgages. Developer Carl Dranoff said these people knew they were three or four years away from moving, but they wanted to buy before their choice of units was gone.

"For a very few, it may not have been the right time to sell," Dranoff said. They opted to rent the condos and hold off selling "because the decision was not pressing."

Contact real estate writer Alan J. Heavens at 215-854-2472 or aheavens@phillynews.com.