Multifamily buildings with the right mix of features for attracting renters could deliver the most appetizing returns for investors.
Even before the coronavirus stalled the U.S. economy and scrambled the lives of apartment renters, property owners were already building and renovating apartments to include amenities that range from extra sound insulation to super-fast wireless Internet connections.
Living through the pandemic has led renters to value many of these amenities even more highly. The most important amenities for apartment renters in 2021 are likely to include access to outdoor spaces and space inside the apartments for people working at home—in addition to fancy technologies like smart locks and smart thermostats and even simple technologies like garbage disposals and sound insulation.
The value renters put on these features go right to the bottom line of how much these properties earn—and how much investors are willing to pay for them.
“The pandemic has caused an acceleration of trends that we saw coming anyway,” says John Helm, partner and founder RET Ventures, a venture capital firm specializing in property technology based in Park City, Utah.
Renters chose extra space
After months of working out of their homes, renters increasing choose to lease apartments that include room for a home office or a place for children home from school to attend virtual classes.
“Apartments with these spaces are more quickly leased and more highly occupied than in the past,” says Louis DeVos, vice president of property management at Woodmont Properties, based in Fairfield, N.J.
These spaces will probably be valuable to renters long after the pandemic ends. Economists expect a significant number of workers to labor at home several days out of the workweek for the foreseeable future.
Renters are also highly interested in apartments that include some access to the outdoors.
“Outdoor space could move up significantly on the list of desirable amenities,” says Rick Haughey, vice president of industry technology initiatives for the National Multifamily Housing Council (NMHC), based in Washington, D.C. “A lot of people who rented a place without a patio probably really regretted it.”
A desire for peace and quiet
Sound insulation is increasingly important to renters trapped at home day in and day out. “There have been a lot of noise complaints since the pandemic started,” says Haughey.
Even before the pandemic, sound insulation was already one most of the most important features for renters, second only to air conditioning. Nearly all renters (94 percent) said they were interested in soundproofed walls or wouldn’t consider renting an apartment without them, according to the 2020 NMHC / Kingsley Apartment Resident Preferences Report. Sound insulation is relatively inexpensive to install when a building is first constructed, and more complicated to add later, once the walls and ceilings are built out.
Broadband internet service is even more important
Renters sheltering at home also needed fast Internet connections to handle video conference calls and streaming movies. That need is unlikely to totally go away, even after the pandemic is gone. At the minimum, apartment owners should make sure their local telecom companies have enough infrastructure to consistently provide a minimum of 150 magabytes per second in upload and download speed to all the apartments at their properties.
“At least get the specifics on the what kind of bandwidth they can delivery to the building as a whole and compare that to a bid from a pure Internet service provider like [technology companies] GiGStreem or a GigaMonster,” says RET’s Helm.
Even before the pandemic, nearly all renters (92 percent) were interested in access to high-speed Internet service or wouldn’t consider renting an apartment without it, according to the 2020 NMHC/Kingsley report. About three-quarters (75 percent) were interested in or wouldn’t consider renting an apartment that didn’t have high-speed Internet service “pre-installed.”
“Broadband has always been near the top of the list,” says Haughey, speaking of the last several years of results from the Kingsley survey. “The pandemic has highlighted how much capacity you need.”
More developers are spending to install wireless Internet connections for entire apartment buildings, similar to the wireless Internet service available in many hotels, says Helm. This wireless service can provide connections to hardware like smart locks and water sensors. “The building owners want it everywhere because they are adopting more systems that need it,” says Helm.
Smart gear for contactless leasing
Many building owners installed new technologies to lease apartments safely during the pandemic. Newly-installed gear like electronic smart locks allow potential renters to take self-guided tours, in which they can visit apartments without ever meeting a member of the leasing staff in person.
These technologies will continue to be important, even after the end of the pandemic. “Contactless leasing and virtual touring—that is here to stay,” says Zach Aarons, co-founder and general partner at MetaProp, a property technology incubator based in New York City.
Contactless leasing allows potential renters to shop for apartments when the leasing office is closed. “That will help with people who have different schedules,” says DeVos. “It’s a great way to provide flexibility.”
Renters often pay $25 more in monthly rent for apartments outfitted with gear like smart locks and smart thermostats. “At a cost of $700 to $1,000 per apartment, that’s just a two or three-year payback on the investment in smart technology,” says Helm.
Smart technology was also important before the pandemic, according to the 2020 NMHC/Kingsley report. More than three-quarters (77 percent) wanted a smart thermostat, almost three-quarters (72 percent) wanted smart lighting; two-thirds (67 percent) wanted smart locks and half (51 percent) wanted an Internet-enabled refrigerator.
Smart locks and access technologies can also help provide access for package deliveries. “The vast majority of multifamily housing stock in the U.S. is in buildings with no doormen,” say MetaProp’s Aarons.
“Owners and developers were probably already thinking about package lockers,” says Haughey.
Inexpensive garbage disposals a top amenity
The humble garbage disposal is also a hugely important, low-tech amenity—especially since many renters began to eat three meals a day in their homes while they sheltered in place from the coronavirus.
“You are seeing an extraordinary amount of food waste,” says Aarons. Even before the pandemic, nearly all renters (92 percent) that they were interested or wouldn’t consider renting an apartment without a garbage disposal, according to the 2020 NMHC / Kingsley report.
Source: “The Apartment Amenity Race Adapts to COVID-19“