By all accounts the multifamily housing sector is still booming. Numbers are literally, almost through the roof. According to MPF Research, occupancy is at 95.6% and the industry is growing 3.5% annual and pricing has gone up 1.9% since last quarter. Market experts are predicting there’s no plateau in sight.
What’s causing the growth?
In a word—Millennials. This generation is flocking to multifamily housing like no generation before. They are slow to purchase houses because of excessive student debt, but they are more mobile in the job market, thanks to a more steady economy. Therefore, they are more likely to choose less permanent housing options. They value amenities like gyms, cafe-style business centers and pools built-in to their communities because they desire to live near where they work and socialize.
Who is benefitting the most?
Middle class (class “B”) markets are seeing the strongest growth rates. High end (class “A”) multifamily commercial real estate is experiencing growth as well, but on a smaller scale because of a more niche market.
What are the challenges?
It’s much more costly to recruit new tenants than it is to keep current ones, so the resigning of leases year-over-year is a huge initiative for apartment leasing companies. However, with the Millennial market, turnover is a big issue because of lifestyle changes (marriage/divorce), roommates, job movement, etc. To keep tenants, multifamily complexes are creating more desirable lease renewal contracts and offering amenities that make it hard to pack up and leave.
Hows technology contributing?
Technology is making a big impact on multifamily housing. Revenue management systems make it easier for commercial leasing companies to track demand and adjust rates. These systems work similarly to airline or hotel booking technology, reducing vacancies and maximizing profits.
SEO, Craigslist, Zillow and other apartment rating platforms have also shaped how potential tenants find multifamily housing units, so it’s important for commercial property managers to harness these technologies as recruitment tools as the search methods become more and more digital.
If you are interested in further discussing the forecast of multifamily commercial properties in St. Louis, let’s talk.