There are changes happening across the multifamily arena that is drawing interest from both tenants and property owners and managers alike. The changes are reshaping the way multifamily apartments are designed as well as the scope of amenities being offered.
This helps draw a better caliber of tenant to the multifamily housing market, and present property managers and owners with an opportunity to offer high-demand services that result in increased rents. We’ll take a closer look at what some of the hottest trends are and how they could apply to different types of multifamily properties.
What Renters Are Looking For
Before taking a closer look at the trends that are emerging in the multifamily arena, let’s look at what renters take notes on when assessing apartments. According to a survey conducted by Utah-based Entrata, a multifamily technology company, price is the number one attribute (74%), followed by the neighborhood where the apartment is located. They also place a higher value on having utilities included in their rent, which ranked higher than the square footage of the apartment. Specific amenities came in at 31%.
When renters were asked about their “top of mind” desires, the top three desires were in-unit washers and dryers, which was followed by a gym/spa, and the third was a swimming pool. These findings were published in Multifamily Executive Magazine.
The magazine also surveyed renters on what amenities they would be willing to pay extra for each month, and the responses were (in order of preference): smart technology, in-unit laundry, online rent payments, secure access, a gym or fitness center and smart-home features.
With regard to price, renters still wanted a “luxury” aspect in their apartment. To meet pricing needs of renters, apartment builders are making units smaller. They did this in order to add amenities and give renters the luxury feel that they wanted. As of five years ago the average size of a 1-bedroom apartment was 1,000 square feet. Today, the same units are 8% to 10% smaller.
Living Closer to Downtown
One of the biggest trends in multifamily properties is that tenants are willing to give up square footage in order to live closer to the downtown or the center city areas. This trend is fueled by Millennials who tend to not spend a lot of time in their apartments. Part of this draw is opting for an urban lifestyle that doesn’t require long commutes. It’s happening not only in large, established cities but in smaller communities as well.
The truth is that renting is the only way that many people can afford living in the city’s central core. Housing prices have skyrocketed, particularly in cities like San Francisco, New York, Boston and Chicago. It appears that high-density multifamily housing offers people an opportunity to live in these desirable areas at prices that are more affordable. It’s happening in all segments of the market, including high-, mid- and low-rise buildings.
Tenants Want More Technology
The technical revolution has permeated just about every area of the country and every level of society. That includes renters, who now are asking for smart technology when looking at apartments. They want free WiFi and Internet TV access. According to Building Design & Construction, they also are willing to pay for smart home technology - over 75% were willing to pay additional rent for security cameras, keyless entry systems and smart thermostats like Nest.
Another area where technology is taking center stage is the addition of enclosed workstations that are available to tenants. Rooms set aside for computer use feature printers, Internet connections, scanners and other tech tools. For the most part, they don’t include actual computers, as most tenants work from their own portable ones.
Technology is also being used to give tenants more control over their energy use. In addition to Nest smart thermostats that enable renters to set heat and cooling temperatures remotely, other features include LED lighting, electric-car charging stations, floor-to-ceiling windows and more. Older buildings are being renovated with additional insulation and energy-efficient HVAC and mechanical systems along with other energy and money-saving options. All of these technology improvements help both tenants and building operators lower their operational costs.
The More Amenities, the Better
Tenants are seeking out buildings that offer a variety of amenities, and the more amenities that are offered, the better. What used to be an exercise room with nothing more than several pieces of fitness equipment is now converted into a social gathering area for tenants. It’s part of the trend of young urban socials that want opportunities to meet and socialize with the people that live in their buildings. Having a space for classes like yoga and other physical fitness programs is an added bonus.
Thanks to the explosion of online shopping, another in-demand option that tenants request is a package room. Package rooms include secure lockers where delivery services place packages, and then send tenants a text or email with a combination code to unlock the locker and notification that a package has arrived. Some properties are charging for this service while others are providing it as a means of attracting tenants.
One amenity that is often sought out but is not currently in widespread use is in-apartment washers and dryers. These in-apartment laundry units are in high demand in many markets, but they do take up space and they require a large financial expenditure for equipment and plumbing. Costs can be recouped over time by charging a premium for having washer and dryer in unit.
Depending on the geographic area where the apartments are located, pools ranked high in renter demand. These areas including hot climates, where air conditioning also ranked high. And surprisingly, while many apartments offered pet-friendly amenities, yet demand was low. Most properties charge a “pet rent” fee, which is enough to cover the additional wear and tear caused by pets.
Pet spas, on the other hand, are becoming a hot amenity in many markets. These include on-premises pet sitting, and often either on-=premises grooming or there is a contract with a groomer who will come in and provide services to the tenants’ pets. Other pet amenities include dog parks and pet washing stations where pet owners can wash their dogs once they’re finished romping through the mud.
There is also a big demand for bike racks and bike storage facilities. Most renters don’t want to give up any valuable square footage to have a bike sitting in view, but welcome the opportunity to keep their bikes safely stored and easily accessible just minutes away.
Amenities aren’t limited to individual units - they’re expanding to the outdoor property areas as well. Nicely appointed community areas are springing up outdoors. This includes rooftop gardens and areas for relaxing with friends. Other additions include outdoor kitchen areas with room for tables and chairs that are designed for the exclusive use of tenants.
Other Market Trends to Consider
In addition to the hottest home trends in the multifamily arena, you should also consider other market trends that could potentially impact investments in multifamily properties. It’s important to look at these additional trends so you can understand the type of renters your properties may encounter.
The demographics of typical renters have changed, and you can thank Millennials for that. Millennials are simply not purchasing homes as early as prior generations did, which means that they’ll stay in the rental market longer. However, it’s not only Millennials who are changing the rental base.
Seniors aged 55 and older are also a growing group of renters. They’ve become empty nesters, have sold their homes and are now entering the rental market. They’re doing it in large numbers, according to the National Multifamily Housing Council they’re accounting for more than 30% of renters. Demand for rental units will also come from the increased immigration entering the U.S.
The supply of rental units can’t keep up with the current demand, so in addition to building new multifamily housing, there’s a huge need to renovate and update the existing older properties. It’s predicted that by 2030 there will be 4.5 million multifamily units needed to accommodate the rental population.
The other factor to consider is that the popularity of single-family rentals is gaining in popularity. It’s estimated that more than 50% of all renters live in buildings with less than four units. It’s a trend to keep an eye on as it could impact the renter base down the road for larger multifamily properties.
This look at the hottest home trends in the multifamily arena shows that renters are asking for more; more amenities, more technology and more control over the way they live. They want luxury and in many cases they are willing to pay extra to get the things they want. That bodes well for property owners as long as they’re able to deliver the type of amenities that their tenants are looking for.
About the author
Ellie is the founder of Blue Lake Capital, a real estate company specializes is
multifamily investing throughout the United States. She is also the host of a
weekly podcast called "That REllie Happened?! Unbelievable Real Estate
Stories with Ellie", a podcast that brings the true stories behind the deals,
from the most successful real estate investors around the globe. Ellie started
her career as a commercial real estate lawyer, leading real estate transactions
for one of Israel’s leading development companies. Later, as a property
manager for Israel’s largest energy company, she oversaw properties worth
over $100,000,000. Additionally, Ellie is an experienced entrepreneur who
helped build and scale companies by improving their business operations. She
holds a Masters in Law from Bar-Ilan University in Israel and an MBA from MIT
Sloan School of Management.