Discovering New Markets - Global Corporate Renters and Flexible Rentals
With rental growth slowing in many markets, multifamily operators are looking toward traditional corporate rentals and even flexible rentals to add value to the rental community - and to the bottom line. At the 14th Annual Apartment Innovation and Marketing Conference (AIM 2019), which took place at the Hyatt Regency Huntington Beach on May 5-8, a panel of experts shared their insights on how multifamily operators can access this new business demand without additional risk. Moderated by Kitty Callaghan, Vice President, Marketing, Wasatch Premier Communities, panelists
- Damon Gacicia, Head of Supply, Urbandoor
- Lisa Trapp, General Partner, Senior Vice-President, Sequoia
- Kim Walker, Partner and CMO, Niido
took attendees on a journey of exploration on how to benefit from new demand streams.
“This is real dynamic change,” said Callaghan. “Things are happening fast and there’s opportunity on every side.”
Not only that, the Fortune 500 companies that rent temporary housing for their global workforces are also changing their behavior. Where once they engaged relocation companies, more and more are now giving employees a lump sum to find their own apartment, according to Urbandoor’s Gacicia, who concluded, “This shifts consumer behavior.” In addition to normal corporate behaviors like extended stays and rotations, there is an emerging segment, called Nomads. “With a mobile workforce, more people can take jobs anywhere,” said Gacicia. “The one common theme with these renters,” he noted, “is that they are ultimately looking for a place to live.
“So there are three opportunities for multifamily: One, rental income; two, occupancy; and three, getting yourself in front of that renter, and sign a long-term, unfurnished lease with that person who renting from you.”
Sequoia’s Trapp can attest to the advantages of short-term rentals (STRs). But at first they were a hard sell to management.
“When we first started having this conversation with asset managers,” said Trapp, “they kept looking at it only as an arbitrage opportunity. But where there is normalized rent growth, if you could actually run ahead - occupancy-wise - of your sub market, by taking off rental for STRs, it will actually drive up occupancy. And by limiting availability and getting higher rents, that feeds down the NOI.”
Then there’s the resident advantage. With STRs, she said, “friends and family can now stay in your buildings and not be crowbarred into a one bedroom apartment. Depending on whom you partner with, the residents can also have access to stay in units throughout the country.”
Niido is all about benefits for everyone. In partnership with Airbnb, Niido’s business model is to own and manage buildings that are Airbnb-friendly. Everything is up front, said Walker, “We work in cities that allow Airbnb. Renters are coming into a building where home sharing is acknowledged. We allow our renters to sublease their apartments or parts of their apartment by putting it on the Airbnb platform. This allows our tenants to make money or offset their costs.”
The Niido model has other advantages. “We run our apartments more like a hotel. We have wellness programs, social activities, happy hours and barbecues. We have ‘master hosts’ who are concierges for residents as well as Airbnb guests. They can walk tenants through the process of putting their apartments onto Airbnb.” In conclusion, Walker said, “Our services make everyone feel part of the community.”
When considering STRs, Trapp suggested that operators take note of the following conditions:
- A trendy urbanized area where rentals are in oversupply - and STRs are legal
- Where STR creates a competitive advantage (or is necessary to survival)
- Starting STRs at about five percent of the rental mix
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