While many multifamily housing market trends are what we expect to see this time of year, there are a few trends to watch if you own or manage properties.
Here are three trends Brad Baar, Owner and Broker and Brodie Rucinski, New Business Manager at Corridor are seeing in Minneapolis.
TREND #1: Renters are on the Move, Right Now
According to apartments.com, more than 40% of renters plan to move in the next six months. That timeline is cut in half when you look at trends among young and working-aged adults: About one-third of 18-24 year-olds and a quarter of 25-54 year-olds plan to move in the next three months.
With the ever-present threat of a recession, many renters are looking for affordability. Retired people are leading this charge, with 37% of those age 65 and older saying they plan to move for a more affordable rent. The rest of the generations aren’t far behind; 30% of all renters say they plan to move to save money.
People want More — or Sometimes, Less — for their Money
This money-saving trend aligns with the national projection for slowed job growth and an increase in unemployment. In the second half of this year, we can already see this happening. We have talked to a lot of people who work for bigger companies and layoffs are happening in big ways.
Economic turbulence changes the mindset of the consumer and it plays a large role in what they decide to do with their money. Indeed, only about 25% of renters say they are upsizing right now.
“The key is to capture the right prospects through a robust property marketing plan. When you provide a timely follow-up to leads who have the funds to move into or stay in a building, they are more likely to rent from you — even if the space is more expensive than the property up the street.” says Baar.
#2 TREND: Location, Schmo-cation
Only 11% of renters plan to stay in the same neighborhood when they move and 1 out of 5 are not sure how close or far they want to be to their current residence. We are really watching this trend closely, too: A whopping 42 of renters say they are looking for properties in other markets.
This lack of affinity for certain neighborhoods could be a sign of the times with people eager for a post-pandemic change of scenery. Or, there could be other reasons, such as a lack of awareness of what is truly available in their neighborhood and within their budget.
Home is where their Hearts Are
This is exactly the type of scenario that drew Corridor to this part of the leasing business. “We enjoy taking a personalized approach,” says Rucinski. “We get to know what a prospect wants and needs. To us, they become more than someone to fill a vacancy — and they can feel that, too. It frees them up to choose the right apartment for them.”
Recent new construction in our suburban markets — Maple Grove, Golden Valley, Plymouth, St Louis Park, Hopkins, and Carver County — gives people more options to choose from. Our hope is that, combined with space available in downtown Minneapolis, this will be enough to keep the people in the region who help it thrive.
#3 TREND: Inventory is up; Renter Demand is Down
Even as new construction in the Twin Cities over the past three years created a large inventory of multifamily units, renter demand had been keeping pace — until recently. The local vacancy rate began to spike earlier this year and by the end of the first quarter, had risen to 5.3%.
Renters are really starting to feel the effects; the year-over-year cost of an apartment has increased by 3.7%, including a nearly 1% increase in Q1 of 2023 alone. Meanwhile, and not surprisingly, the multifamily investment market has also slowed down, so there is a lot at stake for all of us in this industry.
Right now, buildings are going after the same people and competition has increased exponentially. “When buildings go after the same potential renters, they have to do something different, or they will start going down the hole of offering more and more concessions just to fill the units,” says Baar. “That’s where we come in. We create a differentiator by giving people our full attention and a hands-on experience — these are meaningful experiences for prospects.”
The good news for supply and demand in the short term is we do expect new construction to slow down over the next few months. In fact, NorthMarq is already reporting a 20%+ decrease in multifamily construction permits this year compared to 2022.
When Cuts in Rent Don’t Cut It
In the longer-term, Corridor sees an opportunity to help ease the uneasiness. “While it’s tempting to cut rent or give concessions to help fill units, that approach is not sustainable,” says Rucinski.
When multifamily property owners and managers need to put other strategies in play, that’s where we lead the leasing strategy and elevate their services. “This is our sweet spot at Corridor; our niche is connecting with prospects,” says Baar. “We are 100% focused on forming relationships and we love to sell. Most importantly, we can carve out the time to spend with prospects that property owners and managers can’t while they are busy running and maintaining buildings.”
With hands-on experiences and in-person tours, we can move property owners from making concession-driven decisions to creating authentic, genuine connections with prospects. “When we do this, prospects choose something they want and they feel is right for them versus just being the best price or sweetest move-in deal,” says Rucinski.
Resources:
Apartmentology | CoStar/Apartments.com | NorthMarq | Colliers | MultiHousing News | Fannie Mae
