Smaller Apartments, Closer to Transportation Are the Future
- Jun 28, 2010
Dees Stribling, Contributing Editor
Boca Raton, Fla.–Multifamily development is a tough game these days. Yet there are seasoned vets still in the game who have seen every part of every business cycle in recent decades, and for them the current sluggish economy is just one more. It’s been a very deep contraction this time around, to be sure, but one that can be survived.
Joel L. Altman’s company, the Boca Raton, Fla.-based Altman Cos., has developed, acquired and managed more than 16,000 apartment and condo units over more than four decades, both in southern Florida and elsewhere in the country. It continues to be a multifamily player, slogging through hard times with some success. Its Ft. Lauderdale condo development called Sapphire, for example, caught in the worst of the Florida real estate slump right after its completion in 2006, sold only 10 units until the end of 2009. Since then, 44 units have sold.
Once his company’s current condo developments are sold off, however, Altman says he’s getting out of that business. The future, he believes, will be in rental apartments. Recently, MHN talked with Altman about getting through the worst of times, and looking forward to the demographic-driven — and maybe attitude-driven — recovery for the apartment sector during the 2010s.
MHN: What kinds of multifamily properties are going to be in demand again, once the economy recovers?
Altman: The future is in smaller apartments, in terms of square footage, and those that are closer to urban centers and transportation hubs. Size will decrease to save on costs, both development costs and operational costs. And proximity to transportation will be more important in the future because the cost of energy, especially fuel that automobiles use, is going to go up again.
MHN: Will people accept smaller apartments?
Altman: They will, provided the properties are more convenient than they used to be, and I think that’s happening too. Just about everything can be done online, for instance — you can pay rent, ask for a service call, schedule the use of facilities. We’re seeing the percentage of people taking advantage of that kind of convenience increasing, and we’re retrofitting our older communities to handle it.
MHN: Will on-site amenities be more important to renters than they are now?
Altman: In the future, many rental apartment communities will be able to offer similar packages of amenities as condominium communities do now. For example, in one property we’ve put in a spa operated by an outside vendor, and it’s by appointment. Also, we’re putting in demonstration kitchens that host cooking classes. It’s become a social event to go to one of these classes.
But neighborhood amenities will be just as important in the future — will the residents be able to walk to basic shopping and entertainment? That’s what residents will be looking for in a location, and that’s what apartments will have to provide to succeed.
MHN: Will apartments be able to compete with for-sale properties?
Altman: Yes. There’s going to be a major shift toward renting in the coming years. Out of the total number of households, it will be a shift of as much as four to five percentage points to those who will rent rather than buy their housing. Some of that number will have to rent because of their tarnished credit ratings. Others will choose to rent for various reasons. For-sale housing won’t be seen as the investment it used to be. It’s going to add up to a major shift in the way Americans house themselves.
Even if that weren’t the case, population growth would increase the demand for apartments. There will be more younger people — the echo boomers — entering the market for housing than before during this decade, and their parents — the boomers themselves — will also be in the market for seniors housing, mostly independent living.