Affordable, Up-Market Housing
A Residential Development Category is Emerging that Disrupts Long-held Notions of Multifamily Marketability, Density, and Yield
The new category has rewritten the development playbook in markets of all sizes and locations, from New York, Toronto, and San Francisco to Des Moines, Stockton, Beaumont, and Toledo. Welcome to the rise of efficient residential design.
Efficient residential design critically rethinks what a space can achieve in terms of comfort, style, quality, and value, thanks in large part to a new generation of multifunctional furniture. This revolutionary furniture presents a value proposition that serves the interests of “experience-not-stuff” millennials and ROI-minded property owners. A quick take on this residential development phenomenon:
- Rent at the 63-unit White Buffalo multifamily housing community in Fort Worth, built to efficient design standards, commands a per square-foot rental rate 20 percent above market rates.
- Average rents in one upper-Manhattan neighborhood average $35 per square foot. The owners of a five-story walk-up leased-up their furnished, efficiently-designed property at $70+ per square foot, a 100 percent rental premium.
- The owner of a renovated historic building in Asbury Park, N.J. introduced elements of efficient design into select units. The result? Furnished units sold 65 percent faster.
- The owners of a 122-unit condo community in Victoria, B.C. built 97 units to efficient design standards. All 97 units sold-out before construction, a Victoria sales record.
- In South Bend, Ind., Matthews LLC is selling new, 3,000 square foot town homes with first floor ‘lock out’ rental apartments that are smaller than 300 square feet. These apartments are commanding a premium rent, often covering in excess of 70 percent of the homeowner’s mortgage, property tax, and interest cost.
Vast New Sweet Spot
The Urban Land Institute validates the growing cascade of owner experience in a landmark study that confirms units under 600 square feet command per-square foot rents 54 percent more than 600-1,000 square foot units; 81 percent more than units of more than 1,000 square feet.
The force-factor driving this development surge is, of course, profit. Without regional exception, the ULI study illustrates a rapidly-growing gulf in unit-size class, with smaller units now outpacing the next leading category by up to 2x in rental dollars per square foot. And as tenants can attest, the smaller the unit, the more critical is the layout, design, and the use of dual-purpose furnishings.
Here’s the intriguing part: This profit multiplier isn’t confined to sub-600 square foot units. The principles of efficient design apply to all housing categories. Yes, everything from multi-bedroom units to single-family homes and commercial projects can profit from reimagined—and furnished—spaces.
Look, Ma, No Furniture Expense!
“Times have changed. Demographics have changed. Tenant needs have changed. In our Ollie product, our units are furnished because millennials aren’t into collecting furniture and ‘stuff,’ and they don’t want to be rent-poor. They want location and an affordable rent that lets them have money left over to enjoy themselves,” explains Chris Bledsoe, Founding Partner, Stage 3 Properties of New York City.
Ride the Wave
Where are you placing your development bets for 2017, 2018, and beyond?
No one is better qualified to advise you on the growing role of transforming furniture on the housing market than the industry leader, Resource Furniture. Their project insight from working on dozens of successful multifamily projects can better inform your decision-making. What works? What doesn’t? What can you do—right now—to minimize risk and claim your “efficient residential design premium”?
Resource Furniture advisors are standing by, happy to offer proven ideas and share experiences that can enrich your project planning.