How the Next Generation is Changing the Apartment Market - Sachse Construction
Topics: Multi-Family & Hospitality, Sectors

How the Next Generation is Changing the Apartment Market

The generation that’s been plugged into iphones and internet their entire life is turning the apartment market on its head with their socially conscious and community-oriented lifestyle.

Live-work-play, the buzz words of the latest cycle, are being overtaken by something as old-fashioned as bricks and mortar – community.

“Community is really important,” said Lesley Lisser, senior director, asset management at Invesco, which manages a multi-billion dollar portfolio of multifamily properties across the US.

Speaking at the 4th annual Women in CRE Symposium hosted by New York University Schack Institute, Lisser said, “We’re finding it’s old fashioned things that work. Our teams are focused on developing relationships with local vendors and making sure tenants get old fashioned things like discounts and coupons and making the community a part of where they live. We create events where they can make friends. This is stuff that’s been going on in multifamily for as long as I’ve been in the space and these old-fashioned things do work and you find that all of the residents appreciate it.”

The fusion of home, work and leisure space has been picking up steam as more and more developers attempt to read a market that has been undergoing dramatic changes as the biggest segment of the population moves into the home market – millennials.

Today, those born between the years 1981 and 2000 make up America’s largest generation, bigger even than the Baby Boomers. Where and how they choose to live is driving what experts believe will have a lasting impact on which cities rise and which recede.

As they work to attract and retain these residents, developers have deployed a range of amenity-driven strategies with a manifest that has been visited by everything from private jet service (111 Murray) to indoor skateparks (Waterline Square), bowling alleys (555TEN) to doggy daycare (MiMa) all while the size of apartments has shrunk to the smallest ever.

In the past 10 years, the average size of a new American apartment has shrunk by five percent to 914 s/f. According to internet listing service, RentCafe, the smallest apartments are in Chicago and Manhattan where they measure on average 733 s/f. This while rising construction costs and dwindling land supply has pushed rents up 28 percent.

But rather than driving everyone to the suburbs, research shows that millennials in particular are driving urban development to new heights, swelling city populations and pushing affordability to crisis point in many major cities.

In a first-of-its-kind study released earlier this year, researchers from Georgia Institute of Technology and the University of Illinois analyzed the net migration of young adults across the US and found that their hankering for city living doesn’t appear to be a passing phase as they place a premium on “consumption amenities,” like entertainment and culture, as well as transit access.

Over three quarters of all millennials would also rather spend money on an experience or event than hard goods, according to a 2018 study by Harris Poll. Most (69 percent) believe attending live experiences helps them “connect better with their friends, their community and people around the world.” In the coming year, 72 percent said they would like to increase their expenditures on experiences.

At 235 Grand in Jersey City, developers KRE Group and Ironstate Development introduced the most community-focused of their three-building partnership on June. With more than two thirds of its 549 apartments already leased and with half the property now occupied, the community building is well underway.

“We’ve already had a few very well attended events and we are planning a Halloween costume party and ‘friendsgiving’ dinner where residents bring their favorite dish to share with their neighbors,” said leasing manager Brandon Ochs.

Tenants have dubbed the building’s co-working space “The Google Room.” Explained Ochs, “A lot of our residents work for tech companies like Google and Facebook. They started calling the co-working space the Google room straight away because they said it looks just like their offices.”

Indeed, the cushioned booths and mid-century modern aesthetic come straight from a tech-office design playbook, with shelves holding vintage train sets and steampunk knick-knacks giving the space a homey look.

With each new building, KRE and Ironstate have been tweaking amenities to appeal to an apparently fickle consumer whose tastes seem to change with the wind.

But according to Ochs, leasing manager with The Marketing Directors, “Today’s residents require less living space and want more community space. They have less stuff and spend more time doing things. We used to create big lounges and libraries and people would use them to work in. Now we are creating purpose built co-working spaces instead because a lot of our residents work from home and this type of community space is what they want.”

Hoboken-based Ironstate pushed its way into the tri-state building spotlight in 2016 with its ground-breaking Urby concept. The Staten Island building raised eyebrows with its a farmer-in-residence, chef-in-residence and beehive colony.

As the industry watched to see whether it was an over-the-top publicity stunt that would fade with its headlines, David Barry, CEO of the company, insisted that creating units as small as 371 s/f and then packing his building with amenities that fostered community spirit and neighborly interaction was what would appeal to the growing millennial population.

“Urby aims to reshape the apartment industry by combining fresh modern design with intimate collective spaces that are faithfully programmed for relaxed interaction, rejuvenation and fun,” Barry said when Staten Island Urby opened in 2016.
Three years on, Ironstate is set to open its fourth Urby, this one a partnership with Brookfield Property Group in Stamford, Connecticut, where its signature community design continues to evolve, with food and beverage services being embedded within the building’s lobby and open to the public.

Award-winning local chef Mike Pietrafeso will run Roost and its menu of coffee, light fare and cocktails, seven days a week. Residents will also have access to a communal kitchen where neighbors can meet and interact through “thoughtful programming and social happenings.”

It’s a pattern that is repeating across the multifamily landscape as property owners work to attract and retain tenants.

“Experiential programming is the next evolution of amenities,” said Matthew Villetto, executive vice president of Douglas Elliman Development Marketing, who is leading leasing efforts at 475 Clermont, a new development from RXR Realty.

Over the summer, the Fort Greene building partnered with supper club startup Resident to create communal dining events for residents with a live-in chef program. As part of an amenities package that includes an outdoor movie screen and a bocce court, each resident is entitled to two tickets to a monthly dinner with wine pairings.

Resident chef Bronwen Kinzler-Britton lives in a one-bedroom on the complex and she and colleague Meryl Feinstein, host the meals in her apartment that’s been decked out in art by local artists Iman Raad, Vincent Stracquadanio, and Katharine Marais.

“Creating a unique culinary experience in an intimate setting that fosters community is a true differentiator in the marketplace,” said Villetto.

RXR CEO Scott Rechler – who has been at the forefront of the transit oriented development movement – said the chef program was about “enhancing the sense of community” at the building.

Last month, Extell announced a partnership with vendors at Dekalb Market Hall that will organize tasting events for residents of Brooklyn Point where a 40,000 s/f food hall has been created. Some of the events planned for the building’s foodies include Street Food Saturdays, Chinese street food demos by Jianbing Company in the building’s demonstration kitchen, and Sunday Bun-Day, Korean fried chicken served on the terrace. For kids, there will be ice cream socials in the game room by Ample Hills Creamery.

“With occupancy slated for early 2020 we are planning to create a more collaborate living experience for our residents,” said Ari Alowan Goldstein, senior vice president at Extell.

Speaking at the NYU symposium, Kinsey Sale, executive director Real Estate Americas, J.P. Morgan Asset Management, said screening rooms have been scrapped in many of her company’s developments to make way for larger public spaces. “More people have flexible work arrangements, so we program a lot of co-working space, conference rooms and technology.”

And it’s not just the millennials. “We have older boomers wanting to come back to the city and get rid of their big houses in the suburbs and we are seeing a lot of the young millennials progressing in their careers and making enough money to be able to afford some of these luxury products,” added Sale. “the trick is trying to achieve that sense of community for both demographics.”

Added Lisser, “I find the older and younger demographics want the same thing, even in New York City. We have empty nesters and residents just out of college and they go to the same events. It goes back to people wanting a sense of community and I don’t think we have done different programming, juts more programming.”

While the bulk of its multifamily portfolio is suburban garden-style complexes, investment giant Blackstone also owns the 11,200-unit Stuyvesant Town complex in Manhattan.

“In Stuy Town, the sense of community is extremely important to people,” said Melissa Pianko, Backstone’s real estate managing director. “We do all sorts of things to promote community, from a flea market to a farmers market every week. We have chess tournaments. We do a lot of stuff to foster a sense of community and we have a diverse community there. We see it as our job to create a sense of community for everyone who wants to participate.”

Giant asset managers like Blackstone, Invesco and JP Morgan also have a close eye on technology and how it is shaping the modern living experience.

“We own $1,450-a-month garden apartments and our renters aren’t demanding smart homes quite yet,” said Pianko. “But in some cases they are going to start demanding more technology and that’s something we are going to try to invest in, but it will be 100 percent based on ROI (Return On Investment). It’s not like wifi, which people need otherwise they are not going to live there. Smart living is nice, but not yet a need-to-have type of amenity for most renters.”

Where smart technology is being applied is in energy consumption, another issue close to the millennial’s heart.

According to Lisser, smart tech that adjusts heating and cooling systems, lighting and water loads is a double-barreled asset playing to both the owners’ ROI by reducing costs and the residents’ desire to reduce their own carbon footprint.

“Residents like something they can participate in,” said Pianko. “In Stuy Town, we have solar roofs and composting. It’s extremely visible and they know it is happening. The more actionable and tangible you can make it for a resident, the more they are going to care.”

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