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The_Urban_Investor_Three_Things_to_Consider_When_Investing_in_Apartment_Buildings_in_Large_Cities

When planning investment strategies in large cities, multifamily investors need to consider what their residents value highly and strive to meet resident needs while allowing for the absolute best return on their investments.

 

The Urban Investor: Trends to Consider When Investing in Apartment Buildings in Large Cities

May 15, 2018

Investing in apartment buildings in large cities is quite different from investing in suburban multifamily communities. While it’s true that, regardless of where you choose to invest, core demographics and neighborhood appeal each play a role, urban investors need to entice city dwellers to their apartment properties. According to TransUnion SmartMove, 84 percent of all renters are under the age of 50, with the median age 32.[1] Additionally, 64 percent of millennials rent and 75 percent of millennials work in cities or large towns.[2] That means investors would be wise to pay close attention to the younger generation’s wants and needs, as well as to the desires of older renters.

Recognize Current Trends When Acquiring, Repositioning, or Developing in Large Cities

Whether you’re considering acquiring, repositioning, or developing urban properties as your investment strategy, you should strive to attract various residents and get the best return on your investment. When attempting to appeal to both younger and older residents in cities, it is important to focus on layout design and functionality. This is good news for investors since adding functionality is more affordable than decreasing the number of overall units in a complex to increase individual apartment square footage, for example.

The millennial generation appreciates the functionality of open spaces, so repositioning for them could include eliminating walls so that one large room can fulfill more than one need. Older residents appreciate high-end finishes and maintenance-free living. They also value universal design, a combination of layout and elements that integrate with luxury amenities and allow older residents to live comfortably. 

City apartment dwellers also like the feel of a “one-of-a-kind” building, which is why some investors are repositioning historic downtown buildings and repurposing older materials in new developments.[3] A roof deck is also a great example of uniqueness and can be used for anything from pocket gardens to community barbecue and relaxation areas.

When considering acquisition or development, remember that many people today lead very active lifestyles, and they want their apartment communities to reflect that. Acquiring a multifamily property or a new development property that’s within walking distance to stores, restaurants, entertainment venues, and parks or hiking areas will attract young and old residents alike. A community in proximity to city transit stations and schools will attract commuters with children.

Specific Amenities that Appeal to Urban Renters

When choosing the best areas to focus investment on within your apartment community, especially when you own a Class A luxury multifamily property, amenities will be high on your list. Although there are many to consider, the following will appeal greatly to urban renters.

Cell phone reception. While adequate reception might seem like a no-brainer in modern times, a 2017 NMHC/ Kingsley survey of more than 270,000 apartment residents found that 78 percent of those interested in this amenity wouldn’t sign a lease without it.[4]  Cell phone reception, something on which we all depend, can be an issue in a downtown district with many high-rise buildings. Taking steps to improve it could give investors an important advantage.

Secure resident parking. Secure parking for residents and their visitors promotes convenience in addition to safety. Parking is rarely easy in a large city, so even if this is offered at an extra cost to residents, it’s an amenity they likely wouldn’t mind paying for. Of the residents surveyed for the NMHC/Kingsley report, 88 percent expressed interest in secure parking and 71 percent of those interested wouldn’t rent without it.

Swimming pool. Many apartment building residents work long hours and don’t relish the idea of driving any distance just to enjoy a swim after a busy day. In fact, 82 percent of residents surveyed expressed interest in this amenity, and 60 percent of them indicated that they wouldn’t sign a lease on an apartment that does not offer a pool. While a pool is an expensive upgrade, residents are willing to pay more for the convenient, refreshing addition.

Fitness center. One of the many ways in which the millennial generation impacts multifamily property investment is through their focus on health and wellness. Not only is a fitness center a top priority for millennials, but also the layout and design of the center must fit their current needs. Treadmills, stationary bikes, and free weights are staples of most gyms, but millennials like to work out in the ways they see fit. Creating open spaces in your fitness center will allow for yoga classes and other exercise programs that people of all ages are now extremely interested in. A bike rental area can double as an amenity and a commuting option on days residents are without their own vehicles. Over half (55 percent) of residents polled indicated that they would not rent an apartment in a community that does not offer a fitness center of some kind.

These are just some of the considerations multifamily investors need to keep top of mind when planning investment strategies in large cities. Whether you seek to acquire, reposition, or develop in an urban area, always think of what your residents value highly and strive to meet their needs while allowing for the absolute best return on your investment. 

At CWS Capital Partners, we are a fully integrated multifamily real estate investment management firm that offers everything from due diligence and risk management to transaction support and property management.  We own multifamily investment properties in major markets across the country and specialize in assisting our clients with 1031 exchanges, acquisitions, repositioning, and development. We employ a team of experts, who can help you hone your investment strategy. For more articles like this one, check out our investment strategy blog posts.

Contact us today to get started on your next investment or for more information about CWS Capital Partners and the properties we manage through our affiliate, CWS Apartment Homes.

 

The information provided here is for your general informational purposes only. It should not be considered a recommendation or personalized advisory advice. CWS has made this third party information available from authors it believes are knowledgeable and reliable resources. However, its accuracy or completeness cannot be guaranteed and sentiment may change due to legal or economic conditions.

All investments involve risk including the possible loss of principal. You should familiarize yourself with all risks associated with any investment product before investing.

Advisory services are provided by CWS Capital Partners LLC, a registered investment advisor.

Securities offered by CWS Capital Partners LLC are through an affiliated entity, CWS Investments. CWS Investments is a registered Broker Dealer, member FINRA, SIPC.


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