The COVID-19 pandemic has fundamentally changed the way people think about their living spaces, and now apartment developers are facing shifting market demand. Before COVID-19, many apartment dwellers found that the disadvantages of living in a small living space were offset by the advantages of urban life right outside their door. But when the realities of state-mandated restrictions forced apartment residents to remain mostly indoors, many discovered that living in a small space to work, sleep, cook, eat, work out, and relax is less than ideal.
Demand for more living space was trending upwards even before the pandemic, and multifamily developers are recognizing that this trend is likely to stick around even as the pandemic recedes. As noted in the latest LightBox Investor Sentiment Report, multifamily sits just behind industrial in terms of investor interest by asset class. Strong demand for apartments given the national housing shortage, coupled with a migration away from dense urban areas, is driving interest, particularly in population growth centers.
Developers are aiming to respond to what people are looking for while considering how to maximize profitability in the face of longstanding labor shortages and rising construction costs. One strong option is finding an optimal property at the right price.
Pre-pandemic apartment building
In the ‘before times,’ apartment developers worked within a different set of market criteria. Affordability was key, which typically meant making apartments smaller. Studio apartments sold or were rented quickly and easily as long as they were in the right location at the right price. This model offered the best return on investment (ROI) per square foot for developers because they could truly maximize the spaces they were offering.
Amenities were also highly sought after. Buyers and renters cared less about living in a small space if they had access to amenities like a shared workspace, a gym, spa, playrooms for children, party rooms, an indoor pool, and an impressive lobby with a doorman. Now amenities are less important (aside from outdoor spaces), and people favor multifunctional living spaces that can easily transition from home office to home gym.
Space is becoming more important than ever to apartment renters and buyers, as people want to separate their spaces and have more options for privacy. Even as the pandemic recedes, working from home has become normalized and is likely to continue at much higher levels than in pre-pandemic life. Companies benefit from reduced costs needed for office space, and employees know they can effectively work remotely without having to deal with the brutal commute typical of dense urban areas. Other areas of people’s lives are becoming more home-centric as well, especially working out.
Now that our lives have changed, developers are having trouble finding renters and buyers for small studio apartments, while apartments with more square footage, such as junior 1-bedrooms, and 1 or 2 bedrooms are in demand more than ever before.
How apartment developers can find cost-effective building opportunities for current and future market requirements
Apartment developers are seeking creative ways to offer renters and buyers more space, while still getting a strong ROI. Developers are finding they can most effectively offset rising construction costs by considering more building sites at the front end of their project to help find the optimal deal.
LandVision, a location intelligence tool, is an example of how data-driven decision-making can help developers find the best deals. With this online platform, developers are able to search for criteria that makes apartments attractive to buyers and renters, such as nearby points of interest, demographics, transportation lines, and more. LandVision allows developers to input the exact criteria they are looking for to find property that’s positioned for optimal profitability.
For example, users can input lot size, land use, ownership status, last market sale, proximity to services and points of interest, and much more. This set of criteria will display all available opportunities on a map. Opportunities for aggregating properties are also made easily visible by finding smaller parcels close to each other that add up to the desired size.
Once suitable sites are found, users can additionally zero in on what they are looking for by adding more inputs, such as specific amenities like grocery stores and schools, demographics such as median age and household income, as well as transportation options.
Developers seeking financial incentives can search for opportunity zones, and see where they align with other property features that may be attractive for potential renters and buyers.
Once optimal sites are found, LandVision provides highly accurate information on assessed value and transaction history to help better understand potential costs and what strong offers could be. Users can also view other multifamily developments to see what types of units are currently offered in the area. For example, one area might show an overabundance of 2 and 3 bedroom units, illustrating that there could be a potential market opportunity to sell or rent junior 1-bedroom and 1-bedroom apartments. Additionally, users can add LandVision’s Builder Sites layer to map out all active and recently completed apartment developments and see what other companies are developing.
20,000+ real estate professionals throughout North America leverage LandVision for data-driven decision-making that maximizes profitability. Apartment developers seeking to effectively respond to changing market needs can leverage location intelligence to support their objectives.
Contact us today for a demo, and see how LandVision can help you find the exact property types you are looking for.
Category Commercial Real Estate