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Date: July 23, 2018
Category: Real Estate

Six Trends Currently Influencing Multifamily Demand

Today, demand for multifamily continues to grow as financial needs and lifestyles evolve. But for many renters, not just any apartment will do. Today’s renters are looking for amenities, neighborhoods, and technology that fit both their needs and wants. Take a look at six of the biggest trends influencing the multifamily market today.

1. An uptick in Class A new construction

In recent years, there have been numerous reports that apartment supply is finally meeting demand. And while there has been an uptick in apartment construction, the majority of this construction is categorized as luxury, Class A development, and is causing a softening in this market for the first time in years. However, due to high monthly rent, many of these units sit vacant. As a result, demand for affordable, updated, Class B apartments continues to rise. In the coming years, look for renters to flock toward renovated multifamily units built in the 1970s, 1980s, and 1990s that meet their needs, but for a lower price tag.1

2. Blurring the line between urban and suburban living

Today, society values livability, walkability, and neighborhoods that draw people together. Previously, this type of lifestyle was restricted to urban living, but for renters outside city limits, the suburbs are taking on a more vibrant, urban-like aesthetic. Thanks to current development trends and renter preferences, the new suburbs are bustling with vibrant town centers filled with shops and restaurants, catering to changing lifestyles and a diverse suburban population.2

3. Older Millennials are starting families

It’s a known fact that Millennials are delaying major life events like marriage, but that doesn’t necessarily mean they’re waiting to have children. A recent study by Gallup shows that only about 50 percent of Millennials around the age of 34 are married, but an astounding 83 percent have children. As Millennials start their families, micro-apartments in the city just aren’t cutting it anymore. More babies require more bedrooms. However, since 2012, more than half of the country’s new apartment developments have fallen into the studio and one-bedroom category, and less than 40 percent have fallen into the two-bedroom or more category.3

4. The desire for affordable amenities

In 2017, U.S. household debt reached a record high of $13 trillion. Student loans rose to $1.357 trillion, auto loans jumped to $1.213 trillion, and credit card debt increased to $808 billion.4 It’s easy to understand why a significant percentage of prospective renters are financially fragile. But that doesn’t mean they’re willing to sacrifice a nice lifestyle. Renters are demanding affordable amenities, including modern and well-equipped fitness centers, outdoor jogging trails, car charging stations, and pet spas.5

5. An increasing demand for technology

High-tech upgrades are no longer distinguishers, they’re expected. Today, multifamily properties are attracting tenants by including everything from online communication and payment portals, to smart home upgrades that allow tenants to have greater control over their lights, heating, and cooling. And with ecommerce continuing to surge, and the broader population receiving packages at least three times per month, apartments are responding by re-purposing janitor and utility closets as ecommerce delivery rooms and lockers.3,5

6. The new industry standard – sustainability

Renters are becoming more committed to sustainable living, especially the growing Millennial renter population. In fact, 64 percent of Millennial renters claim they are willing to pay a little more for sustainability and energy-efficient housing. As a result, properties have been incorporating efficient appliances, recycling centers, LED lighting, and bike rooms.6

A continued need for multifamily

Together, these trends may continue to drive apartment demand, especially for Millennials in their prime renting years. And as economic and social trends continue to evolve and additional trends present themselves, it may present a unique investment opportunity.

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1 Multifamily Housing News. 5 Trends in Multifamily Investing for 2018. 10/13/17.

2 Curbed. The New American Suburb: Diverse, Dense, and Booming. 10/12/16.

3 Bisnow. 6 Ways Millennials Are Influencing the Multifamily Market of the Future. 11/14/17.

The Wall Street Journal. U.S. Household Debt Reaches New Record as Some Delinquency Rates Rise. 11/14/17.

Building Design & Construction. 5 Intriguing Trends to Track in the Multifamily Housing Game. 1/31/15.

Rentec Direct. Environmentally Friendly Rentals: The Value of Going Green. 4/11/18.
 
This information is educational in nature and does not constitute a financial promotion, investment advice, or an inducement or incitement to participate in any product, offering or investment. It is not intended to be used as a tool to determine your specific financial situation, tax status, investment objectives, investment experience, suitability for any specific investment, risk tolerance or investment profile. Resource is not adopting, making a recommendation for or endorsing any investment strategy or particular security.

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