How to Command the Highest Rents

Posted on October 2, 2017

These four strategies will help you determine the right specs and amenities to attract your target renters.

A property’s amenities should be based on not only renter demographics but renter psychographics, as well. Psychographic data indicate your audience’s tendencies, preferences, and values. At Metro Gateway in Riverside, Calif., MBK Rental Living determined the target market responded to green features, so the developer incorporated solar carports in the community that power the electricity for indoor–outdoor common areas such as the game room/lounge and outdoor kitchen space shown above.

If there were any doubt that apartments are, and will continue to be, in great demand, one need only consult the industry research.

Freddie Mac recently projected that an estimated 440,000 new multifamily units may be needed every year to meet the pent-up demand for renters nationwide across all demographics, from millennials to baby boomers. Millennials prefer renting rather than owning, according to recent research from Key Bank, a trend that’s likely to continue, since renting helps meet the demands of their lifestyle and financial situation. Meanwhile, research from Yardi Matrix reveals that boomers are also moving to rental apartments, helping to stabilize occupancy while supporting rent growth in multifamily housing.

These findings present numerous opportunities for multifamily builders and developers, but they present some challenges, as well. As the number of multifamily communities continues to rise, to stay competitive developers must build apartments that cater to renters’ specific wants and needs. Identifying the most appropriate building designs, specifications, and amenities that will attract the right renters and help command the highest rent requires a high level of research and diligence.

The following four strategies can help developers achieve that objective in today’s market.

1. Determine Your Audience First, Then Their Amenities
Utilize market research tools, such as CoStar and Neilson, to help discover both your renter demographics and psychographics. Look to predict not only who your renters are, but their tendencies, preferences, and values.

While data and statistics are important in providing information about who your audience is, psychographics dig deeper into the decision-making process as to what products, amenities, and finishes will attract them.

What does your renter want? Market research helps guide builders and developers to build communities that not only meet renters’ lifestyles, but also increase profits. At Metro Gateway, the first transit-oriented development in Riverside, Calif., our market research revealed that offering green features would go a long way in appealing to millennials. We responded by including a bike-repair station, LED lighting, and solar carports that power the electricity for the indoor–outdoor common areas.

Additional renter-focused amenities are being added to Mitchell Place, a rental community under way in Murrieta, Calif. A large common area that was once used for water overflow has been repurposed into an outdoor oasis equipped with a dog park, tot lot, barbecue area with dining tables, and fire pits surrounding the perimeter. Such investments were made based on the community’s anticipated demographic and are expected to drive a higher rent premium.

 2. Scope the Competitive Landscape 
Take a look at existing product in the target region. With multifamily development stats at their highest nationally since the 1980s, competition is strong. Spend time driving around local adjacencies, visiting the properties, and really putting yourself in your future residents’ shoes. Ask yourself, where does your product fit in this landscape? What is your brand?

Our process to achieve the highest standard is multifaceted. When apartment sites are acquired, they typically come with certain approvals and entitlements. The density, site plan, programming, floor plans, and elevations are often already complete. However, during the design review process, we evaluate where we fit in with the current market and often make architectural, common-area, or community revisions to help us connect with our renters on a psychographic level.

Don’t just take plans and run with them—look to deliver something the current market isn’t providing. Our process has allowed us, even as builders of for-sale home communities, to achieve the same premium standard while designing or repurposing and building our multifamily communities.

3. Leave Room for Discretionary Items 
Keep discretionary items in mind when building a budget for a new rental community. Even specifications as simple as dual-sink vanities can be a win-win for both the resident and builder, commanding higher rents over a period of time with a minimal initial investment. Lofting top-floor apartments to create floor-plan variety is another long-standing renter favorite, along with installing ceiling fans in master bedrooms.

Feedback from renters at existing communities also provides valuable insight and help in mitigating potentially costly mistakes. We’ve learned that small details such as the decision to swap hanging dining-room lights for recessed can lights provides the renter with more layout flexibility. Unexpected grievances can also be avoided. For example, a number of renters have cited the placement of the thermostat in the master bedroom as problematic, so we started placing them in hallways instead.

4. Know the Easy Wins
Though renters expect certain finishes and amenities within their units, adding quality items like fitness centers, security, or indoor bicycle storage are easy ways to increase the value of your community. We focus on using high-quality products and materials, similar and often better than what’s standard in for-sale properties, with the goal of adding value and minimizing renter turnover.

For example, a number of rental communities only offer white and chrome appliances, but we’ve made stainless steel a standard. USB outlets, LED lighting, in-unit washer/dryers, Shaker cabinets, quartz countertops, retractable faucets, tankless water heaters, and side-by-side refrigerators are just a few of the beyond-standard amenities that can add value and command higher premiums at a rental community.

Ultimately, the process of choosing the right specs for your market comes down to understanding both your renter and your competition beyond just the facts and figures, and to use that insight strategically.

Because the multifamily market is predicted to remain tight, high-quality interior products and finishes, as well as desirable community amenities, that fit your renter demographic are the basis for increasing the value of your community and attracting and retaining renters.