multifamily housing sector has been performing very well over the last few
years and 2017 was another solid year. Even though rent gains slowed amidst
robust development, and tenancy levels began to even out in some major cities
it still shaped up to be a good year for the industry.
Expansion will play an important
role in the U.S. multifamily market in 2018. It’s expected that developers are
on track to register the second-highest annual completions count of this cycle,
with as many as 258,000 units delivered. This is based on 62 markets tracked by CBRE Econometric Advisors.
So what does 2018 have in store
for multifamily housing and what trends will set the tone for the new year?
Having a plethora of amenities is
quite normal these days in multifamily housing developments. Amenities such as
swimming pools, gyms, day care’s and even spas are starting to become common
place. However, due to the plateauing of home and rental prices in key markets
such as New York and California, developers and property managers need to
provide something extra to attract new residents and retain current ones.
Many developers are recognizing
the importance of amenities in such a competitive market and are adapting their
properties accordingly. They’re also taking into account the new breed of
renters (millennials) who are looking for the social and tech aspect that’s
been missing from a majority living spaces. They are looking for a space that
accommodates their lifestyle and tastes. Being green and providing pet friendly
options are just some of the points taken into account. In metro city
properties that offer bike storage and maintenance facilities are in greater
demand than ever before.
Real Estate Veteran Michael
Massie from The
Picerne Group stated “The common complaint about amenities is
that they’re like your grandmother’s living room: they’re nice to look at, but
nobody ever uses them, we prefer to install amenities that people actually
Service based amenities are also
starting to become a viable option to increase occupancy rates and revenues. Services
such as laundromat or dog walking can be offered via a third party vendor based
on a profit sharing model.
To keep up with the Joneses and
to push the status quo of multifamily housing owners and developers are
offering a slew of amenities like never before:
The multifamily housing market
has been performing quite well over the last few years and 2017 didn’t
disappoint, registering 6.1% growth in Q4 of 2017. However, as the saying goes
“what goes up must eventually come down” and 2018 may start seeing the
beginning of this plateauing. The reasons for the slow down vary from high
completion counts to increasing rental prices. This doesn’t mean that property
developers and owners won’t have a good year it’s just that the signs are
pointing to a possible downturn so it’s always good to be prepared. The
persistent scarcity of housing has led to surges in rental rates. Nevertheless,
market analysts predict that these dramatic price rises will likely slow in the
coming years as housing becomes more available.
However, don’t start panicking
just yet. According to CBRE U. S. “Developers are poised to register
the second-highest annual completions count of this cycle in 2018, down by 9.2%
from 2017’s cycle peak. Because apartment starts began to slow in 2017, the
multifamily market will get a reprieve from new supply by late 2018 and
throughout 2019.” As an investor it may pay to hold off on investing in the
multifamily market until the end of the 2018.
According to Statista in 2017, 81% of Americans had a
social media profile and they’re utilizing it for everything from doing their
daily shopping to researching the new IPhone. What they’re also using it for is
to find information about properties they’re interested in renting. Potential
renters want to get an idea about the property even before they see it in
person. By seeing pictures, reading comments and seeing how others interact
they get a “feel and vibe” of a place and can make a better informed decision.
Having a presence on social media platforms like Facebook and Instagram also
provides property managers a platform to engage with current and potential
residents and is particularly effective for connecting with younger Millennial
and Gen Z renters who are influenced by peer-based marketing.
As an investment option Class B
multifamily properties are going to be quite attractive in 2018. Granted that
Class B property values and rent will be lower in comparison to their Class A
competitors; nevertheless, Class B buildings are usually at least in good, if
not great condition and may command above average rents. These properties also
pose an ideal opportunity for owners and developers who are willing to invest
in improving these buildings. Many Class B or even Class C properties just need
some TLC and upgrades to command greater rent and attract a higher quality
Many metro cities have been
experiencing an exodus of tenants due to dense population and lack of
affordable housing. Suburbs are now becoming an attractive option and offer
prime prospects for investors looking beyond the cities and searching for Class
B properties in the outer belt of cities. These suburban properties also tend
to have a lower turnover as renters and buyers tend to be young growing
families who want stability for themselves and their children. Many suburban
properties tend to be pretty quiet compared to the city while also sporting big
backyards and outdoor communal spaces which make them easier to rent out.
Of course there are many more
trends that should be taken into account when investing in multifamily housing
however, the 2018 trends mentioned above will provide a guideline for what to
be aware of.
To know more about finance and
accounting services and how they can streamline operations for multifamily
housing providers get
in touch with us.