Owners Look to Fill New Properties. Could Furnished Rentals be the Answer?
To say the coronavirus has caused seismic shifts in the rental market would be an understatement. While the market has remained relatively active through it all, we are witnessing major changes to the landscape that are likely to stick around for some time. New properties planned prior to the pandemic are moving steadily through the pipeline, and owners are offering considerable concessions to attract tenants — particularly in urban centers like New York City, where once unimaginable perks like months of free rent, waived broker fees, and free parking have practically become the norm.
Where does this leave developers, property managers, and owners when it comes to the bottom line – and might there be a more financially sustainable way to fill vacant units with fewer concessions? In our years of experience partnering with multifamily developers all across the country, we have found that furnished apartments rent faster than non-furnished ones, with far fewer concessions and greater ROI over the long-term.
Take Carmel Place, NYC’s first micro-unit building. Because of the project’s novelty and a lack of marketplace data on which to base a decision, property management company Ollie and developer Monadnock were unsure whether they should provide the units furnished or not, so they split the total units between the two:
“In side-by-side tests, Ollie’s furnished units, which feature multi-functional wall bed systems from Resource Furniture, have regularly outperformed comparable unfurnished units by a margin of three to one,” Ollie CEO Christopher Bledsoe explains. Bledsoe’s firm was able to recover the upfront capital expenditures and establish ongoing capital reserves through the premiums the furnished units command.
From the tenant’s perspective, renting furnished helps alleviate the physical and financial burdens involved with moving at a time when many Americans still face economic uncertainty. What’s more, units equipped with multi-functional furniture – wall beds with integrated sofas or height-adjusting coffee tables that transform into a desk or dining table – allow tenants to enjoy the functionality of a much larger unit without actually paying for one.
While certainly not a “one-size-fits-all” solution, offering furnished units gives the multifamily developer a unique opportunity to meet the economic realities of tenants in the age of coronavirus, while simultaneously making units more attractive and profitable.