The multifamily sector needs to embrace innovations that are already in place across several other industries. This will allow the industry to shield itself from the risk of intermarket forces more effectively than it is doing today. After developing over $2 billion of multifamily in Los Angeles through multiple cycles, I’ve witnessed the evolution of multifamily demand. Today’s renters aren’t just looking for a place to “hang their hat” — they’re looking for experience and innovation. Below are two ways multifamily developers can prepare for the renter of tomorrow:
Invest In The Customer Experience
Firms operating in the multifamily sector need to take steps to keep up with the revolutions that are already being implemented heavily in other industries such as transportation, retail, demographics and psychographics. Today, we have a population of renters that is aging and growing more diverse more quickly than any other time in history. Therefore, in order for our industry to stay viable, we need to adapt and build to meet the needs and desires of future residents.
Specifically, one area we must focus on is projects with service amenities that embrace the shared economy and on-demand living. One study found that 80% of customer satisfaction within the targeted apartment communities came from socially-oriented and service-oriented amenities. More amenities led to a 5.1% premium increase over projects with fewer amenities and a 5% increase in lease-up. However, too many social amenities had diminishing returns and actually decreased the price per unit in a sale. In summary, today’s renter will place a premium on experiential living.
In addition, I have also found that consumers do not exactly have a clear definition as to what the term "innovative" actually looks like in an apartment setting. In fact, I believe that many residents have immense difficulty describing what an innovative and futuristic apartment would look or be like. The top two improvements I believe developers should make to apartment layouts for residents are the convenience of the living space and the convertibility of rooms that would allow tenants to transform their space to meet their particular and often temporary, needs.
Embrace Innovation And Smart Home Technology
While I believe that several million apartment units will need to be added to the Los Angeles stock over the next decade or so, anything being built today will not see its first resident until at least the early 2020s. Scott Walter, a former colleague of mine and a Los Angeles multifamily developer, told me that developers must be extremely anticipatory, progressive and innovative to survive the changing market forces that will emerge over the next several years. Scott believes smart home technology will not only reduce his operating expenses but also increase customer retention and is developing projects utilizing smart home technology, flexible lease terms and micro-unit layouts to attract different demographics.
Others seem to agree with this view. According to one study, apartment renters are willing to pay more for a high-tech apartment. The multifamily industry truly needs to understand what its base customers want and must begin to use connective technology to meet some of these needs. Some of these requirements include features such as additional and on-demand parking through tech-enabled valet services, remote entry, high-speed internet, digital management of utilities, access to e-scooters and real-time customer support. Physical amenities, such as pools and fitness centers, as well as other conveniences like in-unit washers, dryers and dishwashers, should continue to be embraced. I firmly believe that issues such as connectivity and comfort are now expected to come standard with the new generation of class A properties in Los Angeles and elsewhere.
Only Time Will Tell
Anticipating what our residents will want in the next 10 to 20 years is more challenging — and more essential — than ever before. But by being able to anticipate what renters want, developers can create niche demand for their product and ultimately shield themselves from any market corrections. Though there are many unknowns, technology will continue to train renters to expect on-demand results. If we want to retain these renters, we must be ready.
