Like all types of real estate investing, multifamily real estate development moves in cycles. When it comes to unit size and mix trends, factors are driven by market dynamics, which includes location, demographics, and size of the development. Let’s look at some of these factors.
The two largest living generations–baby boomers and millennials–represent two extreme ends of the spectrum. Boomers are aging and looking at retirement. The oldest members of this generation have already begun executing their retirement moves. That means they could be downsizing. In some cases, they’re moving from a single-family residence into a senior living or retirement community. While most grandparents aren’t raising their grandchildren, some are, and that means multifamily developments for seniors should take into consideration whether children will be involved or not.
On the other hand, many boomers are moving out of their single-family suburban homes into multifamily properties, and they’re looking at bigger apartments with nice amenities. They want apartment units with layouts similar to single-family homes, but they don’t want the responsibility of maintaining the property. Even if they downsize from a large single-family home, many baby boomers still want to live in a large apartment unit. They like the spaciousness.
By contrast, millennials are making major life decisions, such as marriage and home buying, at a later date than previous generations. Therefore, any multifamily development targeted at millennials should consider these factors, and millennials who aren’t married may be co-living or sharing space with other singles.
Multifamily developments targeting specific age demographics should consider the diversity of living arrangements you are likely to encounter and provide a unit size mix based on that diversity within your geographical market.
Development Size As It Relates to Unit Size and Mix
Large and small multifamily developments often differ in how they approach the unit size and mix. Large complexes, for instance, may sacrifice the number of units overall to include more shared amenities such as fitness centers, pet grooming stations, bicycle storage, larger recreation centers, and terraces. Upscale tenants have come to expect such amenities, so if that is your market, you should expect to build with fewer units and more shared or common spaces.
Another difference between large and small developments is in the number of bedrooms. According to Chandan Economics, 52% of large multifamily developments in 2014 had only one bedroom while 30% had two bedrooms, and only 6% had three bedrooms. Twelve percent included a studio. By contrast, smaller multifamily developments included more two- and three-bedroom units and fewer studios and single-bedroom units (44%, 9%, 7%, and 40%, respectively).
One reason for these differences could be that high-income singles prefer larger living spaces with more shared amenities, while lower-income families with more children may require more bedrooms. Interestingly, the same survey revealed that small multifamily developments increased the number of average bedrooms per unit from 1.4 to 1.6 from 2006 to 2014 while the average number of bedrooms per unit for large developments remained at 1.3 for both periods.
Other Trends Driving Multifamily development
Some senior living communities are beginning to develop properties with large front porches, two-car garages with plenty of space for shelving and storage, upscale kitchens, and open floor plans. Larger bedrooms and larger apartment spaces for seniors has developers including dens for a more comfortable living and to allow seniors more space for entertaining guests.
Multifamily developments that serve immigrant communities may want to consider how some families prefer to keep extended family closer together. That may mean more bedrooms per unit, larger bedrooms in some cases, or even larger living rooms and kitchens. When it comes to multifamily development and unit size and mix, the market dictates supply and demand.