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For real estate professionals, the new year is an excellent time to consider which residential trends will have the greatest impact in the next year and adjust their businesses to account for it.
This year marks an interesting shift in several areas of real estate. There are widespread market changes making certain secondary U.S. cities extremely desirable for renters. There are construction booms and shifting homeownership habits that have increasing influence on the renter market. As concession offerings become the norm, 2019 will see a redefinition of what the word “concession” really means and what that looks like when applied to modern renters. Finally, renters have high expectations when it comes to in-unit tech amenities, an expectation that will only grow as technology continues to advance.
Real estate professionals can leverage these trends in a number of different ways, from trying to grow regional portfolios to revamping their concession offerings. Anything that links back to one of these trends is a smart move for the year ahead.
Renter Migration Leading To New Hot Spots
Many people are in the business of renting in the U.S., but they’re not just millennials or members of Gen Z. While those two generations have a significant hold on the rental market, so, too, do baby boomers — after years of owning, many of them are turning to renting.
What’s more, all three generations are migrating out to more affordable, secondary U.S. cities, and different generations are making different cities popular. Many Gen Zers and millennials are young professionals simply following where the job opportunities are. This is especially true of those in the tech industry, as more tech companies move outside of primary markets. A great example of this is Sacramento: Young professionals are moving there for jobs and for opportunities to get more bang for their buck when it comes to renting. Neighbor city San Francisco has the highest rental prices in the country right now. Other millennial hot spots include cities like Nashville, Austin and Denver.
On the flip side, baby boomers are also moving out of major cities in areas like the East Coast, in the search for more affordable housing as well (and maybe a break from the harsh weather). Across all segments, there is a large migration toward the Pacific Northwest and Central Florida.
For real estate professionals looking to invest in new parts of the country or to grow their existing portfolios, investing in properties in the cities mentioned above are great market opportunities to consider.
New Construction Booms
Some of the largest markets in the U.S., while increasingly expensive, are seeing the most construction right now. The top five markets with the most construction are New York City, Washington D.C., Miami, Boston and Dallas. With new construction comes new opportunities for real estate investors and an assurance that demand is currently strong. With Amazon’s recent decision to locate its HQ2 in Crystal City, Virginia and Queens, New York, and then Google’s decision to open a $1 billion campus — also in New York City — all of these metro areas and surrounding communities will see a real surge in residential construction in the next several years, so investing in these communities could be a quite profitable.
Concessions Get More Personalized
For professionals in the property management industry, there are also some, key non-market-related trends that are critical to account for in the new year.
One of the big trends in the last couple of years is an increasing amount of building concessions offered to renters. This happens frequently in markets with a lot of supply and less demand, particularly in the luxury segment. However, what worked in concessions last year may not be up to par with renter expectations for this year. Property management companies are increasingly turning away from the monetary form of concessions, in favor of either a more personalized concession in the form of a “perk,” or a concession that actually has a return on investment (ROI) for the renter.
More personalized concessions might be anything from a knowing that a renter has small children and offering a discounted rate for the local daycare center, to offering a rock-climbing millennial a membership discount to the nearest rock gym. These concessions can take any form as long as the value remains consistent for each renter, complying with the Fair Housing Act. What’s more, personalized concessions can create a stronger bond between the tenant and their property management team.
There’s also an option to, instead, give renters ROI on their leases. A good example of this is to equip a unit with a new appliance, like a stove, and let the renter take the stove with them should they move after a set amount of time, perhaps a two-year lease. This is not only a great concession for renters; it also promotes more longevity in leases and less unit turnover.
High Tech In-Unit Becomes Essential
Finally, as we’re living in a very modern world with new technologies available to us every day, it goes without saying that renters have certain expectations when it comes to in-unit tech features. What those features might be run the gamut and could include a variety of price ranges, but it’s important that your units include some shape or form of high-tech — ideally something that makes renters’ lives easier. For more pricey features, take a look at things like energy-saving toilets or automatic lighting features controlled by your phone. Smart refrigerators allow tenants to do everything from surf the web to watch television, all while cooking. For a feature that is a little bit more low-key, include Alexa devices in every unit. Apart from the obvious Alexa capabilities, today’s renters can even make rental payments through voice technology and submit maintenance requests through it.
Whichever direction you take in the new year, be it property investment or business enhancements, these key trends are sure to offer you some excellent guidance.