A Red-Hot Market Cools During 2017 According to multiple industry sources, 2017 was the year with the largest apartment demand of the last 25 years, primarily because individuals and families still recovering from the recession suppressed homeownership rates. As the year progressed, the market began to tighten, as 7 of the top 10 US multifamily markets experienced fewer construction starts than 2016. Total 2017 multifamily construction starts declined 7% from 2016, to $194.7 billion. Industry experts cite increasing development costs and limited construction financing as some of the major negative factors, although apartment demand is still quite high to accommodate Millennials who can’t afford homes and downsizing Baby Boomers.

Much the Same for 2018 According to Yardi Matrix 2018 forecast, the multifamily market will continue to grow during the next 18 to 24 months, albeit at a slower pace than recent years, as demand will continue to increase as new household formation will be 1 million for several years. Yardi Matrix expects rents to increase only moderately during 2018, or approximately 2%. Generally, there is an oversupply of luxury properties and fewer affordable properties for individuals and families with moderate incomes. Fewer deliveries of new units occurred during 2017, or approximately 300,000, primarily because of a shortage of construction workers. Yardi Matrix forecasts a robust 20% increase during 2018, to 360,000 new units.

Americans’ Housing Needs Are Changing Dramatically The multifamily market is facing a major challenge from the aging of Millennials. During the early 2010s, rental properties were booming in urban areas, catering to the 20-something Millennials, who were primarily single and starting careers. During 2017, however, urban core populations declined because Millennials were reaching the age to marry and start families. Homeowning households increased more than a million while renting households decreased for the first time since 2004. Another challenge is the large number of single people living alone, or 28%; however, of all housing units, only .87% are studio apartments and 11.36% one-bedroom homes; 39.82% are three-bedroom, single-family homes.

Today’s Renters With the population of adults 65+ forecast to increase 120.1% from 2010 to 2050, more senior apartment communities must be built and focus on residents’ changing needs, a specific set of amenities and larger units to accommodate more storage. According to a FreddieMac report based on a February 2018 Harris Poll, a larger percentage, or 67%, of poll respondents said their finances was the primary reason for renting their next residence compared to 59% during September 2016. The poll also found renters in various categories will continue to rent despite rent increases: all respondents, 64%; Millennials, 59%; Gen Xers, 61%; Baby Boomers, 70%; multifamily renters, 60%; and single-family renters, 71%.

Generations Have Different Perceptions of Renting The FreddieMac report clearly indicates the older the renters, the more satisfied they are with their rental experience: younger Millennials, 30%; older Millennials, 38%; Gen Xers, 38%; Baby Boomers, 43%. Not surprising, Millennials and Gen Xers are more likely to move because of a rent increase, at 40% and 42%, respectively, compared to 26% for Baby Boomers. A majority of Baby Boomers were satisfied with the community in which they live, at 55%, with Millennials, 46%, and Gen Xers, 55%.

Investment Opportunities According to various industry experts, more multifamily investors will turn their attention to class- B and class-C properties, suburban locations and small-market opportunities during 2018. Investors are also attracted to data indicating an average of 325,000 new apartment units will be needed each year through 2030 to address growing consumer and physical markets – and 1989 was the last year the industry delivered 325,000 new units. Another expert states the tepid increase in wages and personal income will have a depressing effect on apartment absorption. He forecasts just a 1.6% increase in average appreciation and a 6% to 7% ROI for investors for 2018.

Advertising Strategies It’s clear from The Media Audit data table on page 4 of the Profiler that as young adults age, TV, direct mail and digital advertising are the best combination to reach these age groups. Be aware of new apartment communities in your market targeting Baby Boomers because TV will likely be the most cost-effective medium to showcase the amenities and larger units seniors want and the evolving services they’ll require as they age. Show realtors and management companies that predominately rent single-family homes how a combination of carefully selected TV programs, ads on your station’s Website and direct mail will allow them to target those who wish to rent homes.

New Media Strategies Record a short video of a few new residents’ move into their apartment to highlight how close a truck can park to the building entrance and the ease of carrying furniture into the apartment and a short testimonial statement for Website and social media posting. Create short videos with each of the apartment communities’ staff members introducing themselves and explaining their job and how they are prepared to address residents’ needs. Ask current residents to record and post short videos of their local shopping trips and visits to local restaurants and entertainment venues to help new residents, especially those moving from another town/state, to acclimate to their new home quickly.