Location, location, location. That’s long been the mantra of residential real estate. But in today’s multifamily market? Lifestyle, lifestyle, lifestyle might be more accurate.
Just ask Matt Guenther, vice president with Detroit-based apartment company Village Green. He’s seen just how focused renters are today on lifestyle rather than location. Blame – or credit – the COVID-19 pandemic, of course, but today’s renters are more interested in finding a multifamily building filled with the right amenities than they are worried about how close this building might be to their jobs.
And with so many people still working from home? This might not change anytime soon.
We recently spoke with Guenther about the changing priorities of renters. Here’s some of what he had to say.
How have the priorities of renters changed since the start of the pandemic?
Matt Guenther: Renters are moving away from “location is everything” to more of a “lifestyle is everything” mindset. Historically, downtown living arrangements appealed to renters because they liked the idea of walking or taking a short bus or train ride to work. Now more of these renters are choosing to move to the suburbs because they no longer need to factor in commute times, and this is a choice that is saving them between $500 to $600 a month in rent.
Conversely, those currently living in the suburbs who have always wanted to live in a downtown environment but couldn’t make the move because they’d be too far from work are now signing leases in downtown areas purely for the lifestyle experience.
How has this changed what renters are looking for in an apartment unit?
Guenther: A lot of people in our Detroit market work in the financial or auto industries. Many of them are working remotely if they have one of these white-collar positions. They are looking for larger spaces that accommodate a small office or nook where they can get comfortable to do that remote work. But at the same time, they want some of the lifestyle things they grew accustomed to when they grew accustomed to living in the urban cores.
The suburbs nearest the city centers are really seeing an increase in demand today. Renters can grab an uber or drive downtown in 15 or 20 minutes if they want to see a baseball game or concert or eat at one of the downtown restaurants. But at the same time, they are living out of the hustle and bustle of the downtown.
Are you seeing more suburbs creating their own walkable downtowns to meet this demand?
Guenther: We are. They are at least focusing on picking their main street and making that area walkable. It does depend on the particular suburb, though, if there is a lot of multifamily housing in that area. What many of the suburbs are doing is building a sort of urban product in their centers. They are offering residents a place to grab a coffee in the morning, walk their dog, eat at a restaurant and visit a bar, all right there within walking distance. Some suburbs have grabbed onto that idea, creating small urban areas in their suburban communities.
Is this rise in popularity of suburban multifamily a long-term trend?
Guenther: I do think it is a longer-term trend. At some point, it will flip back to the urban areas. As we exit the pandemic, eventually employers will push people to get back to the office more than they are now. We will see that rent trend shifting back to the urban cores. But I don’t think this will happen to the detriment of the suburbs. There will always be a demand for suburban living.
The suburbs have seen monthly rent increases near 10% on a year-over-year basis. In urban areas, we’ve seen the more typical 3% to 4% increases. As rents continue to escalate in the suburbs, will urban living become more of a value to renters? Will renters be interested in the excitement of living downtown, especially when monthly rents aren’t increasing by as much? We’ll see.
Downtown areas were in demand by apartment renters before the pandemic. Do you think demand for urban living will rise again?
Guenther: Today, people who want to live downtown can do it if they want because they are not as tied to where their jobs are located. They might work 50 miles from the city. But they might also be working from home. They can now find a unit in a cool urban environment and not worry about a long commute to and from their job each day. There is so much that is undecided because we still don’t know how prevalent work-from-home will be in the future. Will it stay around longer? Will there be a shift back to people in the office? We’re not sure yet.
When we are talking to prospects today, people are looking for apartments in downtown Detroit but also at a suburb 30 miles away. Where people will consider living is so broad now. The commute doesn’t matter as much. People can rent in different suburbs all over the metropolitan area. They are weighing their options.
If lifestyle matters so much today, how important are amenities?
Guenther: There is a heavy focus on the amenity packages. Developers with new products are watching what is coming down the pipeline, making sure others aren’t winning the amenities war. Fitness centers have always been important. Now there is a true demand for top-of-the-line fitness centers with top equipment, virtual and on-demand training, separate yoga rooms and spin rooms.
Then there are the outdoor areas, even in the Midwest where we don’t have the greatest weather. People want firepits and gazebos. They want beefed-up dog parks. The renters moving from the urban areas to the suburbs want the actual building to provide some of the amenities that they received from living in an urban area. Building owners understand this and are adding amenities that make the renters’ lives as easy and convenient as possible.
I know it’s not easy to predict, but do you think demand for apartment properties will continue to increase during the next several months?
Guenther: There is still such a healthy demand right now. The market was strong throughout COVID and I think it might even be stronger today. All our properties are averaging occupancies in the high-90-percent range. We have also seen almost historic rent increases during the last five years. The demand still seems to be there.