Call us today at:(954) 320 - 6031

Commercial Real Estate, Multifamily, Multifamily Land

Next Generation Multifamily

Rental apartment living has increasingly become an acceptable and often preferred alternative to home ownership, even among residents who can afford to buy.  This trend has been attributed to various factors ranging from convenience, simplicity, mobility and even lingering psychological effects of the housing market collapse which impacted so many homeowners nearly a decade ago.  Regardless of the reason, the rental apartment market is now firing on all cylinders in many markets around the country, apartment development is booming and new trends are creating next generation multifamily housing.

This discussion addresses where new apartment inventory is being added, the adjustments apartment owners and developers are making to address market forces and resident requirements plus emerging concepts in apartment living.  Although our focus is primarily on South Florida, the trends and concepts we address are present in many multifamily markets across the United States.

Urban Locations Getting Most Attention

Unlike prior cycles where suburban markets seemed to be universally preferred in South Florida, urban living is the dominant trend today.  Although millennials appear to be leading the way, empty nesters and other former suburbanites have also demonstrated an affinity for urban markets.  Next generation multifamily developers have responded to this trend en-masse.  As of Q1 2017, there are more than 21,000 multifamily rental units either under construction or imminently planned in and around the three South Florida CBD’s of Miami, Fort Lauderdale and West Palm Beach.  Another 12,700+ units in 25 urban projects have been announced but are in the very early stages of planning with a yet-to-be determined development timetable.

next generation multifamily unit pipeline chart

Small is the New Big

Again, in contrast to prior multifamily development cycles, new rental apartments are getting smaller – a phenomenon that spans both urban and suburban projects.  Continually increasing land and construction costs are the primary catalyst for the reduction in average unit size.  For a given project size, building smaller units enables a developer to achieve a higher density and higher average rent per square foot.  From the tenants’ perspective, even though rents per square foot are high, their monthly nominal rent is lower, providing access to locations and buildings they could not be able to afford if the units were larger.

The concept works because renters have consistently demonstrated a willingness to trade unit size for location, lower monthly rent and lifestyle experience.  This trend is particularly evident for well-located rental properties in urban markets where, in addition to property-specific offerings, residents are focused on walkability, proximity to work and access to mass transit.

Micro units, generally ranging from 350 to 650 square feet represent the extreme example of the rent/size/experience thesis which is being tested in urban markets around the country.  In South Florida, several new micro unit communities are in various stages of planning in downtown Miami and downtown West Palm Beach.

Communal housing adds a new and interesting twist to the micro unit concept by eliminating ovens and washers and dryers from units in favor of communal, commercial grade kitchens, laundry rooms and gathering areas.  The concept is based on the theory that the use of these common amenities creates a sense of community and an overall enhanced living experience relative to traditional apartments.  Short term leases are usually available and units typically come fully furnished. Management services such as concierge and housekeeping are common as are regular management hosted events such as dinners and yoga classes to encourage resident engagement.

While still viewed as experimental, the communal living concept has some well capitalized backers. For instance, WeLive, an affiliate of the popular shared office provider WeWork, has introduced communal apartments in New York and Washington DC.  The concept appears to be particularly appealing to residents desiring a true sense of community and eager to make new friends.

Increased Focus on Amenities and the Living Experience

While common amenities have always been an important selling feature for rental communities, the minimum standard developers must offer to remain competitive today has elevated well beyond prior development cycles.  Not only are developers now stacking their properties with an extensive list of amenities, they are offering a variety of services to provide a superior overall living experience.  Examples of amenities and services offered today that might have been viewed as extravagant less than a decade ago include:

Next generation multifamily amenities and services chart

Technological amenities are also beginning to emerge as popular apartment offerings to enhance the resident living experience.  App-based conveniences that can be controlled by a tenant’s smartphone are among the newest technological amenities offered by landlords. Examples include:

  • Smart Locks
  • Smart thermostats
  • Smart lightbulbs
  • Camera access for allowing entry to guests

What Will Next-Gen Parking Look Like?

Parking remains a major challenge for developers and residents.  In suburban markets where most projects have surface parking, the challenges revolve around site plan design, ensuring adequate spaces are provided to meet the needs of residents and satisfying zoning requirements.  In urban environments where parcel sizes tend to be small, site planning flexibility is limited and parking structures are expensive to build.  In South Florida, developers advise that the cost to build a typical freestanding parking structure ranges from $20,000 to $25,000 per space. Parking and other construction costs are even higher in podium-style buildings where residences are developed atop the parking structure.  These added development costs exert considerable upward pressure on rents, impacting the affordability of urban living.  However, an interesting trend is emerging today that could partially mitigate parking costs and the resultant impact on rents.

Industry experts are increasingly ascribing to the theory that the nation’s parking needs will decrease dramatically in the future.  Mass transit improvements, ride sharing programs such as Uber and Lyft and growing acceptance that autonomous cars will soon be a reality has led planners, architects and developers to the conclusion that future residential and commercial buildings will require significantly less parking than they do today. Therefore, new parking structures are being designed with future alternate uses in mind.  The theory is that if and when the building is viewed as being overparked, a portion of the parking structure can easily be converted to a pre-planned alternate use such as:  apartments, stores, office space, storage or amenities.  Similarly, existing parking structures are being analyzed to assess their potential for conversion to alternate, productive uses.

A proposed development in downtown Miami supports the theory that urban parking needs are decreasing.  Developer Moishe Mana has proposed a 49-story, 328-unit apartment tower with no parking. Many people expected the City to balk at Mana’s vision but what happened next was remarkable. The Urban Design Review Board approved the project with an enthusiastic response. The Board hopes that visionaries like Mana can help transform the city into one that embraces public transit as opposed to driving personal vehicles, thereby reducing urban traffic congestion.

Next Generation Multifamily Survival

Today’s multifamily trends underscore the ever-changing nature of real estate ownership and development.  Cultural changes, technological advances and economic forces continue to impact real estate ownership, management and development.  To remain relevant, competitive and thrive in the Next Generation Multifamily environment, apartment investors and developers must adapt to these trends in a way that appeals to their consumer audience, produces sufficient investment returns and ensures sustainability as the world around them continues to evolve.

Sign up for our newsletter to receive more articles like this one!

Published March 2017 by CapasGroup Realty Advisors

There are no responses so far. Be the first to leave one →