How Mid-Term Stays Can Unlock a New Asset Class

Multifamily owners are operating in a highly competitive environment. A saturated market, elevated vacancies, high interest rates and steep operating costs are eroding their profit margins. Resorting to traditional tactics like offering rental concessions, upgrading amenities and cranking up marketing spend has helped alleviate short-term pressures on occupancy and revenue. But while they can boost immediate demand, they are not sustainable, long-term solutions.

To stay competitive, a growing number of multifamily operators are turning to mid-term stays––30-plus days, under 12 months––to diversify demand, maximize occupancy and increase net operating income. The shift corresponds to new demand from renters seeking “flexible stays” that offer fully-furnished units for under 12 months. We have found said renters are willing to pay around $600 to $800 above the market rate for furnished homes and lease flexibility. 

In the past, mid-term offerings have been a temporary or supplemental aspect of portfolio strategies. However, a new survey of 200 multifamily owners and operators illustrates a clear trend: Mid-term furnished stays are moving from an experimental concept to an essential component of a successful portfolio. And it’s paying off. 

Appetite to evolve

Last year challenged multifamily operators to rethink how they maintain occupancy and drive NOI. And even though some have experienced modest recent gains in occupancy over the past year, vacancy has become ever more costly. So much so that nearly half of operators reported losses as much as 9 percent of portfolio revenue due to empty units. They’re eager to change that and are getting creative in their leasing strategies. 

That and other survey findings can be found in a newly released report titled: “Why Multifamily Operators Are Growing Revenue with Mid-Term Stays.”

According to the report, 93 percent of multifamily owners and operators showed interest in new revenue models, with 88 percent actively exploring mid-term stays to reduce vacancies. Eighty percent reported inquiries for leases under nine months, demonstrating steady shift in renter preferences. Already, nearly half (48 percent) already offer mid-term options to some extent, with one third (33 percent) offering them extensively. Taken together, the findings reflect a shift in the industry’s traditional approach to residential, underscored by growing demand for more convenience and flexibility from consumers. Forward-thinking operators are capitalizing on this evolution by adding mid-term options to diversify demand and drive higher, more reliable NOI. 

Navigating risks

While interest among operators is high, the survey identifies a few perceived barriers when it comes to mid-term rentals. Naturally, multifamily operators yet to expand into mid-term stays are hesitant to make the leap, citing uncertainty about market demand (44 percent of non-adopters), operational or logistical complexity (38 percent), and a lack of furnishing resources (33 percent). Top concerns also included higher turnovers (56 percent), impact on long-term residents (49 percent) and operational challenges with managing furnished units (41 percent). 

These hesitations are understandable. Successfully executing flexible stays can seem operationally complex and require extensive investment (e.g. software, furnishings, turnovers, communications, etc.). However, flexible stay platforms like Landing can support the integration of mid-term stays into portfolio strategies with minimal risk. They manage the entire resident journey, from providing demand, to verifying guests, to handling furnishings and turnovers. This can alleviate the operational and technical lift, without disrupting the way multifamily owners operate. In fact, 92 percent of survey respondents report that they leverage a professional service to manage logistics, given the higher touch requirements. For operators looking to ease their way into the market, these flexible stay platforms offer a low-risk path to unlock the potential of mid-term rentals, without upfront capital expenditures. 

Comforts of home—for less time

The mid-term market is ripe for expansion into multifamily. Demand for mid-term options continues to rise as much as 94 percent year over year, according to Key Data. Traditional hospitality companies are claiming a piece of the pie, with new “home-like” options catering to longer term renters like Marriott StudioRes, Hilton LivSmart Studios and Hyatt Studios, among others. However, they lack the authenticity and comfort that multifamily buildings have to offer: community, higher end amenities, larger spaces and full kitchens, and a more local experience. 

Multifamily owners and operators have the advantage, already offering the warm, welcoming environment renters want. Expanding into mid-term allows operators to tap into this growing demand in a way traditional hospitality and short-term rentals can’t, unlocking a new asset class in addition to traditional renting. It’s an opportunity that Landing has found can increase NOI by an average of $18,000 per mid-term unit, generating meaningful incremental revenue compared to vacancy. 

Flexibility for a dynamic industry

Furnished mid-term stays have evolved beyond a niche strategy. The data shows that multifamily operators across portfolio sizes, regions and roles are already expanding into mid-term stays, with others eager to start their journey. New demand for greater flexibility, convenience and quality is driving greater interest in accommodations beyond what the traditional 12-month lease can offer. 

In a multifamily industry that is more dynamic than ever, portfolio strategies must be, too. Innovative owners and operators have an opportunity to capitalize, transforming this emerging market into their competitive advantage. 

Bill Smith is the founder & CEO of Landing, the leading network for flexible-stay apartments.