Fully Furnished Apartments Might be Your Next Product
Investors and property managers routinely think of apartment rentals as empty spaces but that might be changing. America is now a renter nation and today’s rental markets are driven by Millennials and they’re typically an “ownership-free” demographic.
We’re taking a look at the mid to longer term furnished apartment rental and the demand factors that will drive its growth.
Millennials will soon comprise more than half of the workforce in the US, Canada and Australia. They will all be employed and renting yet their wages aren’t expected to rise significantly over the cost of living increases.
Demographics are important but so too is housing shortages, the high prices of housing, and persistently rising interest rates. If housing is troubled now, the future for the housing markets looks higher priced and good for rental unit investors. And California’s housing market and rental markets are indicators for future trends.
Market trends reflect economic, political, and demographic shifts and with that new opportunities appear. Global business relationships and economic shifts are creating the type of relocation activity that builds demand for short to medium term housing.
The key factor right now in the US is rising interest rates which means Millennial buyers will have more difficulty acquiring mortgages and paying for them. That drives the US rental market.
What is a Furnished Rental Apartment?
A furnished unit typically has a bedroom with side tables, lamps, ironing board, iron, pillows, sheets and blankets. The living room has a couch, chairs, TV, coffee table, television, and lamps. The kitchen would include everything needed for storing, preparing meals and eating, including a refrigerator, coffee machine, dishwasher, microwave, stove, table and chairs.
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Many renters are busy workers and they look for convenience. Studies show they desire free wifi and other in demand renter amenities. Due to the cost layout, your rental pricing become a little more complex.
The Business Crowd is Thinning, but Millennials Need Housing
Millennials can’t afford to buy houses and condos, and they’re less likely to invest in furniture as well. If furnishings were provided, they would recognize the value in it, especially if they’re moving to a new city. For the upwardly mobile Millennial, not having to invest in expensive furniture is a relief.
Babyboomers are staying put, but they’re aging fast and will be selling. They’re also travelling. Often they look for mid term rental units during their transition to their next accommodations. They own their own furniture and will not likely be looking for a bigger expense with new furniture.
Furnished apartments/condos are what they want. And as aging boomers travel, they will need traveling nurses who need accommodation.
The business renter too does not want unfurnished units. Businesses in need of housing will typically pay more for this housing type. And long term vacation renters, another growing demographic is not interested in bringing their own appliances and furniture.
“US corporate housing Average Daily Rate was $161 in 2017. The majority of individual MSAs reported an increase of ADR growth in 2017 resulting in a 7.1% increase of 2016, making it the strongest ADR growth since 2007.” – from Chponline report
The key point is that demand comes from many sectors as this graphic reveals:
Strong Growth in the Furnished Rental Market
The furnished apartment segment might be set to grow as a preferred housing type for investors and property managers. Estimates of the corporate housing market are $3.6 billion growing at a 13% clip. Relocation and project training are named as the two drivers of furnished apartment demand growth. 54% of the market is from these two sources.
Currently, it appears the vacancy rate in furnished apartments is up, however this may be due to the economic transition the US is undergoing. If large corporations are cutting back on travel internationally or over US states, it’s likely a temporary issue.
As repatriation of jobs/businesses to the US grows, training and relocation will increase. Many expats will be coming home too. Americans will have to be trained for the new jobs appearing each month. If Americans have to be hired amid a growing worker shortage, free or subsidized rental housing might be a top incentive to them. Interns are cited as the 4th largest user of corporate housing.
Fortunately, this type of housing can be presented to other demographics. And the increased vacancy rate may generate apartments for sale. New York, San Jose, San Francisco, Toronto, Vancouver, Las Vegas, and Phoenix all have their own unique renter base profiles.
A better property management strategy may be to not look at this opportunity as a corporate and extended stay rental property market, but rather as short to extended stay opportunity. Not specializing and being flexible in your offering to renters and how you market your rental might be the better route.
The Mid to Long Term Rental Types
The mid to long term rental housing market is divided up into a variety of housing types: Serviced apartments, Aparthotels, and corporate housing which you read more about in this article.
The nice thing about mid to longer term rental properties is that if you do have vacancies, you may consider short term rentals such as those listed on VRBO and Airbnb.
Short term and mid term property rentals involve more turnover and more work for your property manager. You’d be wise to ensure they are equipped to manage properties using the latest automation software. An all in one cloud based software is a time saver and will result in lower property management fees and better service.
Be sure to check out ManageCasa’s outstanding features which might make the difference in managing a diverse portfolio that includes short to mid term occupancies. See why it’s ideal for you.
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