Within the next decade, the multifamily industry will see more Baby Boomers retire and downsize, more multigenerational families, more renters opting for roommates, and more young and immigrant families: what does this all mean for new property construction? According to recent data in a piece in MultiFamilyExecutive online, all these groups are finding the traditional studio and one-bedroom apartments undesirable in a quest for more livable space. Savvy investors and developers are picking up the trend and opting for more two and three-bedroom options in a bid to draw these apartment seekers looking for square footage…and their own bedroom.
According to the article in MFE, of the current 18 million + rental units in the multifamily market, only a fraction at barely over 1 million have three (or more) bedrooms. They also note that the next 15 years will see huge changes in renter demographics – and these changes will demand more available floor space for some and more bedrooms for others. One source said that there is a supply of market-rate and luxury studio and one-bedroom units as well as affordable housing – but not much in between. The missing ground in between is what investors are hoping to fill as they’re already seeing more demand for other options.
A developer that MFE profiled has actually committed to designing and building spacious but affordable townhome-style rental units. Utilizing demographic information has informed them to create units that will easily host both families with children as well as those with other generations to consider. For example, the townhomes have five bedrooms with a first-floor designed as an in-law suite. This set-up is ideal in areas already feeling the impact of immigrant family apartment rental. According to the data which helped spark the townhome design, the profile for area immigrant families often involves several children as well as older relatives, such as grandparents, living together. They note that in these living arrangements, wages are often shared; the creation of a functional, livable space that is also affordable will fill a current void in the market.
Beyond larger families needing extra bedrooms are one of the largest generations still hitting retirement and downsizing age: the Baby Boomers. As more Boomers downsize, they’re turning to the rental market – but aren’t satisfied with the smaller floor-plans common to many rental units. As the MFE piece points out, Boomers have spent decades acquiring belongings, keepsakes, etc. and don’t want to get rid of everything just because they go from a mortgage to a lease. MFE also notes that Boomers have a set idea of the style of living they want and space for a separate dining room, office, etc. is likely to be part of that. In short, the standard floor plan that works for younger renters and that’s pitched to Millennials won’t lure Boomers who are entering the rental market after decades of owning. The MFE article cites a developer who has already delivered two and three-bedroom sizable units to the Dallas, TX area and they’re seeing strong interest.
When considering developing a multifamily project, it’s important to pay attention to coming changes in renter demands. As interest may wane in typical rental units like the studio and one-bedroom, there may well be opportunities to be had for investors interested in supplying larger floor-plans and more bedrooms.