If you haven’t noticed, multifamily apartments are going up in historic numbers all over Southern California. There are a multitude of drivers behind this massive build. When the housing market crashed in 2008 and then recovered, the new lending laws made it difficult for almost anyone to qualify for a loan. With the last big building boom for apartments over 20 years ago, a surge in apartment building was long overdue. With the job market flourishing, demand for apartments grew.
Millennials who value the access to public transportation and walkability that comes with urban living are fueling the urban sprawl, driving up rents and creating a vacancy rate at a 30-year low. The appeal of being part of the American dream and owning a little piece of real estate isn’t the norm for this age group—now it’s about the desire to move freely from place to place without the commitment of a house. This is contributing to the lowest percentage of first-time home buyers in three decades. Even Baby Boomers are making the transition to apartment living. Some like to downsize after they become empty nesters and enjoy the flexibility of the urban life.
While rent is at an all-time-high and often equivalent to a mortgage payment, there are many advantages to apartment living. For one, these are not the apartments of the past. This is first-class luxury living with a multitude of interior amenity spaces to enhance the shared living experience, as well as exterior spaces that make you feel you are on vacation at a boutique resort. Developers are focusing on the human experience, encouraging social interaction and stirring emotion. People choose to live in these apartments because of all they offer, including the social sensibility.
Apartments are smaller, so common spaces are much more important. Clubrooms are large with kitchens and private dining rooms, with management bringing in chefs for cooking classes, wine tastings or other events. The dining rooms also can be rented out for private parties to supplement smaller dining areas in the apartments. The clubrooms often include media rooms with over sized TVs, pool tables, shuffle board and ping pong, making entertaining at home a great experience. For the person wanting to curl up with a book, there are always intimate seating alcoves weaved into the project.
As the lines blur between work and home, we’re seeing an increasing demand for co-working spaces in multifamily apartment buildings. Residents don’t want to be confined to their apartments when working from home, so many communities are offering both intimate nooks that provide a private workspace, as well as communal areas that allow for a more social or collaborative experience. Clubhouses can double as conference rooms with full media capabilities, and small work stations can function as home offices.
Fitness centers are probably the most popular amenity, with design aesthetic in mind and state-of-the-art fitness equipment in high demand. Linked to the fitness centers are yoga studios that double as dance studios with fitness-on-demand incorporated so a virtual instructor is just a button away. Cycle classes are huge in Los Angeles and Orange County, so separate spin rooms complete with high-energy music are popular as well.
In years past, apartments were very anti-pet. Now, new communities are anything but, with dog runs and dog spas built throughout the property. Pets are now embraced as family, and treats are often found in the leasing office.
As each developer tries to outdo the other in the game of amenities, it raises the bar—and rents—of each project. With lenders tightening the belt on loans for new developments, projects that are not currently shovel-ready might face a bit of a hurdle. As the purse strings tighten, it seems that existing older communities will need to start playing catch up to compete within the current market. Depending on their Cap Rate, we may see a shift to remodels over new construction in the future.