Posts Tagged ‘Apartment Market Trends’

A Look to Apartments of the Future – Millennials Will Dominate

Written by Apartment Management Magazine on . Posted in Blog

Shared post from Axiometrics | by Louis Rosenthal

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The apartment market is always changing. What was popular in the 1980s is a relic today. While today’s renters enjoy the amenities and locations featured at newer properties, changing economies, culture, technologies and interests will make the apartments of the future different.

So what does the medium- and long-term market look like? What should renters, investors and economists know about it in 2025, 2035 or even 2050? This isn’t an idle exercise: While the forces of supply and demand don’t change, the drivers of supply and demand do. In that sense, as we move farther into the future, observers should be keen to demographic and generational changes, technological disruptions and shifting market dynamics.

Starting with demographic and generational changes, the prime renter age group for the next decade or more will be that much-discussed millennial generation. We consider the prime-renter group to include those ages 20-34. If we consider millennials to be anyone born between 1980 and 2000, then the oldest millennials will be 40 years old in 2020, when some of the youngest millennials will be 20. In other words, the youngest of the millennials will still be considered “prime renters” until 2035. Some may think they are entitled, bratty and materialistic — but they will be driving the apartment market for at least the next 20 years.

Consider this: 27% of millennials ages 18-33 have a bachelor’s degree or higher, compared to only 20% of the previous generation, Gen X, according to Pew Research. Only 28% of adult millennials are married, compared to 38% for Generation X when they were 18-33 years old. Perhaps more interesting is how millennials approach the two most expensive assets they will likely ever own: houses and cars.

In 2014, 76.7% of 20-24 year-olds had a driver’s license, compared to 82% of 20-24 year-olds in 2008 and 91.8% in 1983. Over the course of 30 years, the number of young 20-somethings with a driver’s license fell dramatically.  Clearly, the brakes have been put on the car culture that defined Americana in the post-war years. Likewise, only 35% of those 34 and younger own a home, compared to 39% in 2010 and 41% in 2000. In short, Millennials are less interested in driving a car and — at least for now — owning a home.

So what do these trends mean for the apartment market? The homeownership rate is of particular importance because people are classified as either an owner or a renter.

“If the homeownership rate goes down, then the number of renters should go up,” said Jay Denton, Axiometrics Senior Vice President of Analytics. “So, in the end, a declining homeownership rate should benefit the multifamily space, especially given demographics.”

Technology also will be different in the apartment of the future.

Transportation technologies are likely to completely upend the way we think about getting around the city. As driverless cars and Uber-like ride-hailing services become the norm, declining rates of car ownership, more disposable income and the repurposing of America’s 40,000+ parking garages and lots (about 800 millionparking spaces) should follow. This will mean a major change in the physical space that an apartment property occupies, as well as its immediate vicinity. The parking lots could be repurposed into another building or more green space in urban “jungles.”

This, too, ties back into demographic trends: Do millennials want a parking space or do they want adjacent retail shops, movie theaters, restaurants and so on? If it’s the latter, we can safely assume that apartments — particularly those located in urban core areas — will be even more attractive to young renters.

Of course, the economy is a large factor in driving housing decisions. Job growth is the key variable that predicts apartment rent and occupancy growth. When the number of jobs grows in a particular metro, more people come to the metro to take those jobs — and a sizable portion of those job-holders will be renters. In short, when the economy is doing well, so is the apartment market.

So, when we think about the future economy, we need to consider the role of demographics and the business cycle. Starting with demographics, Denton said: “Our country is based on growth, and if you look at millennials, they are waiting longer to have kids, and when they do they are having fewer of them. That means we are not building up our population enough, so we will have to draw on people from other countries.”

In other words, if we are not increasing the population today, then future demand for apartments will suffer as fewer individuals occupy that prime renter age group.

Never far from anyone’s mind is the threat of another recession. As Denton described, “If the economy takes another downturn in the next two or three years, is that another black eye for the single-family home industry? Does the single-family space get hit with a double whammy?”

Another recession in the near future could have two medium- and long-term effects.

  • In the medium-term, it will only further sour younger Americans on homeownership. What is the point in trying to build home equity if there is a deep downturn once a decade?
  • The long-term effects could be similar, but their impact will be protracted: For the youngest millennials alive today, what does it mean to have your formative years colored by deep recessions? Will single-family homes become even less desirable than they might be for the older millennials? Time will tell.

The future is unknowable, and we aren’t presumptuous enough to say that we have some special insight into what the future holds for the apartment industry. We can forecast the key supply and demand variables in the apartment market five years into the future, and we can do so with a considerable degree of accuracy.

But all predictions are necessarily imperfect. What analysts and observers should be doing is asking the sorts of questions raised in this post: questions about the replicability of historical trends, demographic changes, technological disruptions and so on.

All the better to ask these questions now so that the future can be accommodated rather than resisted.

Highlights from the 2014 Income Property Management Expo

Written by Apartment Management Magazine on . Posted in Blog

Pasadena, CA – March 25, 2014

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We hope to see everyone back in Pasadena in 2015!

www.IncomePropertyExpo.com

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2013 Year-End Shows Sustained Rent Growth for Apartments

Written by Apartment Management Magazine on . Posted in Blog

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Our year-end apartment round up shows sustained nationwide rent growth.  However, the distribution is heavily weighted towards the California markets.  Six of the top ten ranked are in California, as are the top three.

RealFacts annual review of the best performing rental markets of 2013

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Other strong performers in 2013 are Austin, TX up $56/yr. from $949/mo. to $1,005/mo. and Atlanta up $54/yr. from $880/mo. to $934/mo. 

Overall the rental market performed well with 32 markets out of the 40 published by RealFacts at or higher than inflation, CPI and cost of living—all three indices for 2013 are approximately 1.5%.  The national average rent was up 5.1% or $53/mo. from $1,040/mo. to $1,093/mo. yr./yr.  Over a four year period, the national average increased by 12.3%, from $952/mo. to $1,078/mo. or $126/mo. gain in absolute dollars.

Over the past four years, apartments grew to be very popular with investors because its returns are predictable and stable. In 2010, when the economy was sluggish, rental housing was thriving.   Turn the page to 2014 to find apartments competing with far more lucrative investment opportunities.  In 2013, the stock market grew by 29% and 35%.  For- sale housing is rebounding–trading at levels not seen since 2006.  Meanwhile, San Jose, arguably the most aggressive rent growth market we track posted a four year average increase of 35%.  The San Francisco MSA was up, 29%; Denver 24% and Seattle 19.4% over the four year period.   Annualized those rent increases range from 4.7% to 8.7% for our strongest markets in the nation.

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So, what do these statistics suggest about the direction of rental housing in 2014?  RealFacts predicts it will bode well for renter and investor alike.

Investors should set their sights on those markets that haven’t fully appreciated in terms of rent growth such as Greater Los Angeles.  A recent RealFacts report shows its four year average increase is just 11% or 2.8% per year.  Los Angeles also has a high barrier to entry.  That means it’s expensive and time consuming for developers to bring new supply to market.  High barrier markets rarely become unbalanced, at least not to a degree that would accelerate a market bust.

For the renter, there are still many affordable options in the heart of the Bay Area with plenty of units available to rent.  If one finds San Francisco too pricey at $3,056/mo., cheaper housing is available in the city of Richmond at $1,305/mo. on average.  It’s a seventeen mile drive or easily accessible by public transit.  Or, for those who prefer Berkeley, but can’t afford its price tag at $2,502/mo. they can opt for a quick commute to the city of San Pablo, just under ten miles away, and pay around $1,266/mo.


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Sarah Bridge | Founder/Managing Member of RealFacts LLC

REALFACTS apartment data is created, maintained and sold by a small staff of hard working people. You talk to us on the phone. You respond to our telephone surveys. You order reports. You ask when our new data will be uploaded. Now you can put a face to the voice; take a closer look at the RealFacts staff.

Millennial Renters: Marketing to the Generation of Choice

Written by Apartment Management Magazine on . Posted in Blog

By: Brittany Worrell Boyce, Marketing & Communications Coordinator – For Rent Media Solutions

The Millennial Generation, otherwise known as Generation Y, is made up of those between the ages of 25-34. This group is known for having strong preferences and opinions, plenty of ambition, and a ‘sky’s the limit’ mentality when it comes to their abilities. They are very tech-savvy, impatient at times, and are always ‘connected’ via their smartphones or tablets.

These days, millennials are more flexible than ever, seeking out careers across the country or even internationally. Partially due to the sluggish (but improving) economy, young people feel the need to take any good professional opportunity they can, even if it means packing up and moving away from their families. Because of this, millennials are choosing to rent apartments more than ever. It’s important that this group is able to pack up and move at a moment’s notice, so renting is more practical for this stage in their lives.

Making Your Community Millennial-Friendly

As a property manager, it is great news for you to know that there’s an entire generation that is actively seeking out a place to rent. Millennials are a unique group, though, so there are a few things you should know in order to appeal to them. They are dubbed the “Generation of Choice” because of their unrelenting demand for choice in all aspects of their lives. Here are the Four “C’s” that explain this Generation of Choice:

(Ad) Choice – You should advertise your community where this generation spends a lot of their time – on their smartphones and on social media. Social and mobile are both ideal resources for showcasing your community’s advertisement and what it has to offer Millennials. It’s to your advantage to seek out ways to target this highly visual demographic, rather than wait for them to look for you. Luckily, with today’s technology, it’s easier than ever to advertise your community directly to this demographic across the mediums that they prefer. Print is also a great resource to add to your advertising strategy – it provides this choice generation yet another search tool for finding their ideal apartment.

Charming Ads – Similar to this generation’s preference for specific ad types, they are also looking for ads that capture their attention with aesthetically pleasing graphics and engaging features. Seek out ways to make your ads more interactive – perhaps incorporate augmented reality using an app like Layar, so users will be able to scan the ad with their smartphone or tablet to learn more about your community.

Connection – Millennials like to stay connected. In fact, they want more dialogue – 76% are looking for a two-way conversation with brands (American Millennials: The Choice Generation, DRAFTFCB). Engage with them and be responsive to their wants and needs, which will forge a positive relationship between you both. Keep in touch with this group through mediums they prefer, such as mobile. Consider communicating with millennial renters using a text message program, which allows you to send news, promotions, and other community messages directly to their smartphones. This group also relies heavily on word-of-mouth, and over 75% of the next generation of renters base their decisions on ratings and reviews. Ensure that your community has a reputation management program in place, which will allow you to listen to what people are saying about your community. This is a great way to learn more about renters’ perceptions of your community and gain knowledge that will help you further appeal to them.

Consumer Control – Millennials are a savvy group. They know what they want, and they expect brands to take that into consideration. Brands are not really calling the shots; it’s the millennials who have dictated how things should work. For example, as an apartment community, this could mean that you offer an online rent payment option because your residents demand convenience. It is widely accepted that consumers dictate the terms of a relationship, and brands are taking consumer preferences seriously in order to appeal to them. Crowdsourcing is a popular trend that many brands are utilizing to incorporate the ideas and influence of consumers into the development of products and solutions that will meet their needs.

Working with millennials may be a change of pace for you as a property manager, but it’s more important than ever to stay in tune with the preferences of this next generation of renters. By tuning in to their preferences and desires, you will learn a great deal about this generation of choice and find ways to incorporate new ideas into all aspects of your community – from marketing and advertising to resident engagement and retention. Millennials are out there looking for their ideal apartment, so there’s an opportunity for you to reach out and appeal to them.


BrittanyWorrellBoyce_ForRentBrittany is the Marketing & Communications Coordinator at For Rent Media Solutions. She specializes in creating internal and external communications for the brand, including press releases, industry articles, sales collateral, and email marketing. Brittany holds a Bachelor of Arts degree from Virginia Tech.

Brittany Worrell Boyce | ForRent.com | (e) Brittany.Worrell@ForRent.com

Why Property Owners Should Consider Micro-Apartments

Written by Apartment Management Magazine on . Posted in Blog

by Holly Aker – Photos provided by the NYC Mayor’s Office via CBS New York

As America’s population continues to grow, property developers are having a difficult time finding space to accommodate eager renters. Now, with the emergence of micro-apartments, property developers may have found a solution.

Micro-apartments are becoming more and more common in population-dense cities like Chicago, Boston, San Francisco and New York City. Typically located in popular neighborhoods, micro-apartments meet the needs of middle-class, single, young renters who want to be close to urban centers but would not otherwise be able to afford the price tag that comes with these areas of town.

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Besides meeting the needs of renters, micro-apartments can benefit property owners and developers by increasing the number of rentals in their portfolio and their total revenue. Property owners can achieve this by converting their current apartments into micro-apartments – or developers can consider developing properties to be used for micro-units.

Take New York City for example: the increasing popularity of micro-apartments spurred Mayor Bloomberg to change the minimum living space requirement to 250 square feet. Seeing as the average one-bedroom apartment in New York City is 750 square feet, a property owner could take that one-bedroom apartment and create three individual units.

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While these micro-apartments will come with a lower monthly rent, property owners will make up for it as they’ll have more units to market. In San Francisco, some micro-apartments are listed for $1,600 a month. This price tag may seem high given the reduced amount of space, but when compared to the average rent in the city – $2,741 a month – micro-apartments are actually quite a deal.

By looking at both of these examples, a property owner can end up with three units bringing in a total of $4,800 per month, which is $2,000 more than what one unit could bring in.

What’s more, micro-apartments don’t necessarily have to be confined to just renovated apartments. In Chicago, property developers are creating micro-apartment communities out of foreclosed flophouses.

Some developers are even using micro-apartments as a way to preserve historic buildings. In Providence, Rhode Island, architects took an old mall that was considered one of the most endangered buildings by the Providence Preservation Society and transformed it into a 48-micro-apartment development.

Factors to Consider

Before jumping into a full-blown construction project, there are a few factors property owners need to consider.

First off, the cost of converting any kind of building into micro-apartments can add up very quickly. As these units will be very compact, they will need to be designed well to accommodate all the needs of renters without making them feel as if they live in shoebox. And since the units will be under construction, property owners will not be collecting rental income.

Additionally, property ownerrs need to be sure they have the ability to take care of all their new micro-apartments. Two or three times as many units means more maintenance needs and more renters who will require more attention and administrative duties.

Location can also be a deal breaker. In order to be successful with micro-apartments, it’s vital that prospective building be in a city experiencing mass growth and in a part of town that is highly coveted by single, young people looking to live in the center of the action.

With the right location, financial plan and target demographic, micro-apartments can be a great option for property owners looking to expand and improve their portfolios.

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HollyAkerThis is a guest submission by Holly Aker, of Austin-based Software Advice.  Software Advice provides free reviews, comparisons, and demos of property management software. The company also maintains a blog about current industry news and developments.

Income Property Management Expo Yields Answers to Uncertain Times

Written by Apartment Management Magazine on . Posted in Blog

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This is an exciting, dynamic, ever-shifting time for income property managers and investors.

Land values and rents are on a rapid upward climb – finally – but so too are operating and maintenance costs, legislative mandates and potential liabilities.

What does this uncertain mix of events mean to the future of the industry?

  • Will the collective assault on Prop. 18 succeed?
  • Will affordable rent become an enforceable mandate?
  • What impact does California’s energy policy have on commercial and investment property now and in the future?

The answers to many of these questions won’t be known until they unfold in the months ahead.

Clearly, the industry is in flux – poised between unprecedented opportunities, demands and uncertainties – and it will become increasingly important as we all move forward for income property owners and managers to stay informed.

How does a busy real estate professional stay current?

A collective resource of experts will provide a one-stop cache of information at the Income Property Management Expo May 7 at the Ontario Convention Center in Southern California. (Visit www.incomepropertyexpo.com for details.)

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Through a variety of presentations, workshops and face-to-face meetings, they will address current issues and trends in the industry, from finance and maintenance to energy efficiency, renewable energy and environmental laws.

FAIR HOUSING, LITIGATION AND OTHER LEGAL ISSUES:  Law firms and legal experts will be on hand to provide the latest information on new statutes, mandates and precedents affecting property managers and income property owners.

FINANCE AND TAX STRATEGIES: Today, 1031 exchanges provide more value than ever. Lending rates are at an all-time low. Experts will be on hand to discuss custom-made solutions for those in attendance, including low-rate cash flow loans.

MAINTENANCE: Frankie Alvarez, co-author of the “Dear Maintenance Men” column, will provide seven important tips and other details to keeping operations to a minimum.

GREEN MANDATES AND INCENTIVES: How do AB32 and other new pieces of legislation impact how you must do business? What kinds of incentives are available to income property owners to save energy or to go solar? Government representatives and service providers will be on hand to explain the many incentives that can help building owners save money on energy costs.

This is a great opportunity to catch up on the latest, to touch base with experts with questions specific to your situation, and to network with others in the industry who might be of value later on.

When it comes to staying informed and getting the most from the time invested, the Income Management Property Expo is an efficient resource that could bring about significant returns. A second expo is planned for October in San Mateo. Visit www.incomepropertyexpo.com for details.

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Deniene Husted is a longtime journalist and public relations professional with nearly 25 years of experience serving the Southern California region. Reach her at dhusted@sdrpr.com

Income Property Management Expo

Written by Apartment Management Magazine on . Posted in Blog

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Apartment News Publications Inc. is teaming up with the Income Property Management Expo to provide Apartment Owners/Managers & Commercial Property Management Companies with tools for efficient, cost effective management, operation and maintenance of their communities & facilities!

Join us May 7, 2013 for the Southern California Income Property Management Expo at the Ontario Convention Center!
Click here to Pre-Register Online!
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Southern California Attendee Information:

  • Apartment Owners
  • Property Managers
  • HOA
  • Commercial Property Management Companies
  • Service & Maintenance Staff
  • Industry Partners & Vendors

This expo will host FREE seminars throughout the day addressing CA Energy Efficiency Programs, Landlord Legal Updates, Tax Code & 1031 Exchanges, Property Maintenance and more!  The goal of the Expo is to provide attendees with the opportunity to network with other industry professionals while enjoying fine food tastings, the PGA Experience, Luxury Car Display & Test Drives, raffles & giveaways and the expo floor which will have over 100 exhibitors!

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To learn more about the Income Property Management Expo, how to attend for FREE, or learn how to reserve a booth for the Expo Floor, visit IncomePropertyExpo.com!

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Industry News: Apartment Market Expansion Continues as Growth Rate Moderates

Written by Apartment Management Magazine on . Posted in Blog

“Even after nearly three years of recovery, apartment markets around the country remain strong as more report tightening conditions than not…”

WASHINGTON, D.C.—Apartment markets improved across all areas for the seventh quarter in a row, but the pace of improvement moderated according to the National Multi Housing Council’s (NMHC) Quarterly Survey of Apartment Market Conditions. The survey’s indexes measuring Market Tightness (56), Sales Volume (51), Equity Financing (56) and Debt Financing (65) all measured at 50 or higher, indicating growth from the previous quarter.

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