Though multifamily certainly wasn’t the biggest segment of housing represented at last week’s NAHB International Builders’ Show in Orlando, it certainly may have one of the brightest near-term futures. That was represented in NAHB Chief Economist David Crowe’s projections for the sector in 2011 and 2012, which he predicts will see starts rise 16 percent this year to 133,000 units and 53 percent in 2012 to 203,000 units.
Driving that demand of course, is the lack of supply (Crowe said in the “Economic Forecast and State of the Industry for Apartments and Condos” panel that the 100,000 units lost a year are barely being replaced) and the much-hyped Gen Y generation has yet to evolve into a strong renter demographic. “Young folks are still living with their parents, in roommate situations, and in dorms,” Crowe said.
Apartment owners seem to be preparing for their arrival though. Multifamily panelists spent a lot of time at IBS talking about exactly how to build, market to, and serve this long-awaited demographic, even though there are questions regarding whether or not Gen Y can afford the type of product that the industry is developing.
Panelists on the “The Future Is Now: Using Technology to Transform Your Multifamily Communities” established that Gen Y likes to do business 24/7, wants real-time unit availability and leasing options, consumes mobile marketing, enjoys property-wide and common area amenities, and expects WiFi, a quick cable hookup, and the ability to get cell reception in their unit.
The panel also looked at things renters weren’t expecting yet, like 3D television. Dave Schwehm, vice president of community solutions for Time Warner Cable, says proactive apartment communities could have an advantage if they go 3D in their common area entertainment centers. And, as the panelists on the “What Apartment Renters and Condo Buyers Want: Strategies to Increase Occupancy and Drive Sales” panel pointed out: simply putting high-end computers in a business center can help, even if residents already have their own computers.
“The business center is important because they [the residents] want to get out of their apartments,” said Julie Smith, president of Greenbelt, Md.,-based Bozzuto Management.
As far design and finishes, apartment owners have new competition in the mind of the renter—the projects initially planned as condos that are now being rented out. That presents challenges for owners of existing stock. These buildings include spacious units, green rooftops, yoga studios, dog runs, office spaces to meet with clients, and high-end gyms. “They [renters] come to expect the finishes in a moderately priced condo building,” said John Chappelear, senior vice president in charge of multifamily development for McLean, Va.,-based Kettler.
The one saving grace for older apartment owners is that many Gen Yers can’t yet afford these finishes and are renting older units by necessity. . While apartment owners, developers, and managers spend money to plan and build platforms for Gen Y, many members of that cohort can’t yet pay for these features. “What will they do once they get through the pipeline?” questioned Jay Jacobson, a partner at Atlanta-based Wood Partners.
Developers are trying to solve that riddle. “We’re building smaller units so that we can price them for that [Gen Y] renter,” Chappelear says.