As the construction of new multifamily affordable houses in the US stalls due to a lacking workforce, some investors are taking the opportunity to entice new tenants and lower their vacancy rates. So suggests new research on the vacancy rates of A, B, and C class apartments across the country. As Mark Armao noted in a recent article, a lack of skilled labor forces in the construction sector has stalled the completion of many multifamily projects across the nation. Though many of these projects are still underway across San Diego, the prevailing demographic in need of these units are finding them well over their price range.
High end construction across metros nationwide mean many of the new Class A units available to rent in high population areas like San Diego are actually priced well above the average local income. As a result, many potential tenants have begun to look into class B and C units for a similar experience but for a better value. In a recent article for GlobeSt titled ‘Why More Renters Are Shifting To Class B Multifamily’, Jennifer LeClaire suggests that renters are particularly seeking out older properties with renovations able emulate Class A level amenities. As evidence, she cites a recent study conducted by RENTCafé which showed B and C communities holding a national vacancy rate of 3% compared to 4.1% for Class A properties.
LeClaire notes “Historically, the A vacancy rate has trended below that of B and C multifamily properties, so the latest numbers represent a shift. While this can be partially attributed to all of the new A supply that has come online, it’s driven largely by the affordability of existing multifamily communities combined with a lack of new construction in this segment of the market.”
With so many people seeking B and C class housing, having a property with enticing offering may be the way to stand out.
Adding perceived value to your property with renovations is nothing new, but identifying Class A-like amenities that are best for your property might be a little tricky. Commercial Real Estate Finance Company of America identifies Class A amenities as being “dictated by other Class “A” products in the market”. This can include exterior spaces like courtyard and recreation spaces, or interior like dishwasher units or technological improvements. For San Diego investors, many of these renovations can be accomplished with a simple refresh. “Many of the multifamily buildings [in San Diego] are 30 to 40 years old and in need of refreshing to both the interior and exterior” explains Norm Root, senior vice president at ACI, “this means bringing things up to contemporary standards, asking yourself, what would I do if I was building a property from the ground up today?” Root notes that many modern buildings are looking into stone, particularly stacked horizontal sand stone facades could bring a current look to a tired exterior. For the inside of units, Root suggests phasing out elements that could be dubbed “original” and instead going for new flooring like linoleum wood and more modern appliances. “Look into making the space work for modern sensibilities” he concludes.
With these simple improvements, investors can help their property stand out to renters looking for a Class A experience but for a tighter budget. As the rental market continues to shrink on affordable offerings, you want to make sure your investment attracts renters that will help you keep a low to nothing vacancy rate. These helpful tips for amenity improvement is just one of the ways ACI can help you improve your investment.
Read Mark Armao’s article for the San Diego Daily Transcript HERE
Read Jennifer LeClaire’s article for GlobeSt.com HERE