How older apartment buildings can compete with new construction
Multifamily construction is booming in markets from coast to coast. Markets like Seattle, Austin and Los Angeles are all expected to gain more than 10,000 new units this year, while New York will add nearly 20,000 according to Moody’s Analytics CRE.
Cities seeing spikes in construction have strong demand from renters, and some markets are still playing catch-up after construction slowed during the pandemic, says Lu Chen, Associate Director and Senior Economist at Moody’s.
With so much new construction underway, existing property owners may wonder how to compete with shiny new apartment buildings. Here are three ways to stand out amid the competition.
1. Focus on high-impact updates
When planning a renovation, concentrate on areas that are most likely to grab renters' attention: the kitchen and bathrooms, says Ben Gold, real estate investor and founder of Philadelphia-based Recommended Home Buyers.
“Those two areas are the decision-makers while the tenant is doing the walk-through,” he says.
Using white tiles, vanities and walls in the bathroom and white cabinets in the kitchen can make those rooms feel more spacious. Sticking to white also makes it easy for owners to keep up with changing styles by swapping out decor elements.
“The latest color towel, shower curtain and rugs can change the entire look of the room,” Gold says.
In the kitchen, repainting cabinets and installing new granite countertops can also give the room a fresh look, he says.
2. Offer something newer properties don’t
If a new development is opening nearby, research its features and find ways to offer something the new building doesn’t, says Doug Greene, owner of Signature Properties, also in Philadelphia. One of Greene’s strategies: Include a monthly cleaning service with the lease.
Greene’s cleaning company offered him a reduced rate because he was requesting regular work at multiple units in a single building. He built that cost into the rent and says residents love the uncommon perk.
“It’s another differentiator,” he says.
Owners can also lean into what makes their properties unique.
When GLB Properties in Los Angeles renovates its luxury vintage properties, many of which are 80 to 100 years old, the group makes certain key investments, such as renovating kitchens and bathrooms and installing central air, says Ivana Rose Bramson, GLB’s designer, creative director and brand manager/ambassador.
But Bramson’s team doesn’t feel pressure to try to match the brand-new look and fancy perks new buildings might offer, she says. Instead, they aim to cater to people who appreciate living in a historic property.
“If [having] the pool and the fire pits and the valet are a deal breaker for someone, we can’t really compete with that,” she says. “But if someone’s looking for a place where they feel at home and feel inspired, I think we take the cake on that.”
3. Don’t forget the fundamentals
You don’t need a brand new building to offer top-notch customer service.
Be responsive if maintenance issues come up and consider being flexible when renters ask for accommodations, like the option to extend their lease a week. That kind of individual service may be tougher to come by at a brand-new high-rise with far more residents, Greene says.
“As a landlord, being human with your tenants is going to go far,” he says.
Keep your market’s new construction in perspective
While new unit counts in the five figures may sound worrisome, it’s important to consider the context. Several of the markets with major growth this year saw construction slow during the pandemic, and it’s important to consider the overall size of the market, Chen says. While Los Angeles is expecting nearly 13,700 new units, that will increase overall apartment inventory by less than 2%.
Meanwhile, the resilient job market and slow single-family housing market both support strong demand for apartments, she says. Assuming the U.S. does not enter a recession, Moody’s anticipates five major markets which are expected to gain at least 10,000 new units and see inventory grow at least 5% — New York, Orlando, Austin, Seattle, and suburban Maryland, which includes several Washington, D.C. suburbs and Frederick, Maryland — to see “moderate” increases in vacancies in 2023. Of those markets, only New York, with its “persistent low affordability,” is expected to see rents decline, Chen says.
By Lauren Zumbach from Story by J.P. Morgan
What’s the multifamily outlook in other U.S. metro markets? Watch our mid-2023 apartment market analyses for 13 cities across the country.