Multifamily Development Trends: Becoming Part of the Community
- Nov 04, 2019
With Columbus’ population growing at twice the national average rate, all eyes are turned toward the metro’s multifamily market, which is expected to accommodate the growing demand for units. And just by looking at the heavy development activity in the last two years, it becomes clear that the metro is set to fulfill its residents’ needs.
Roughly 8,700 units were underway across Columbus as of September, with approximately 90 percent of units targeting high-income residents, according to Yardi Matrix data, which is set to temper rent growth in the luxury segment. Given the limited supply of market-rate units, it remains to be seen how rents in this segment will fare in the next quarters.
The largest project underway is LC RiverSouth Phases II – IV, a two-building development near the Scioto River. The development belongs to Lifestyle Communities, one of the top property owners in Columbus. When fully completed early next year, the property will include 370 units. The company’s senior vice president, Rob Zelina, discussed the project’s impact on the metro’s multifamily market in the interview below.
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Developers in many metros across the country are having difficulties finding construction workers and some areas are recording pipeline delays, also due to trade tensions. Has this been an issue for your company in Columbus?
Zelina: In most cases, no, this is not an issue for our company. We have been doing business with several subcontractors since we launched the business in 1996, and because we continually have projects in the pipeline, we can offer longevity and long-term security for our construction team members.
What is attracting investors to Columbus right now?
Zelina: Yield, simply put. The Midwest has been largely overlooked by national players, as the focus was on gateway cities and the South. Columbus is one of the fastest-growing cities in the Midwest due to its diverse economy, strong university presence, governmental presence and a burgeoning health-care market. The city is home to Fortune 500 companies, Fortune 1000 companies and a growing number of startups across all industries.
Columbus also boasts one of the highest populations of college students in the country, with over 50 college and university campuses. This ensures a talented pipeline of workers in a top-ranked location. Together, these factors point to a healthy city and continued economic and population growth.
What are the emerging submarkets for investment?
Zelina: Columbus has many great emerging submarkets for investment, including the RiverSouth district, Franklinton, Old Town East and Italian Village, among others. In 2009, we identified RiverSouth as an emerging neighborhood with long-term potential that we could invest in. Today, we have over 600 units in RiverSouth including a new Goat restaurant and social hub, and our inclusive wellness offering, CODE. Both amenities are open to the public and add to the submarket’s continued growth.
How do you see the Opportunity Zones program affecting the real estate dynamics in Columbus? Could the downtown resurgence model expand into the nearby areas?
Zelina: Opportunity Zones are attracting investors to areas that otherwise wouldn’t see that investment. They are opening doors to economic opportunities for many Columbus neighborhoods that have a rich history but have experienced economic and social hardship. I anticipate that Columbus will start to see more Opportunity Zone developments over the next 24 to 36 months. The resurgence model has already expanded in Columbus and into many areas with great promise like parts of the Scioto Peninsula, Franklinton, Olde Towne East and others.
Tell us a bit about LC’s most recent project in Columbus and how representative it is for the course of the market.
Zelina: Our most recent project in our hometown of Columbus is at LC RiverSouth, which is currently in the lease-up stage. Our RiverSouth investment is over 600 units and totals over $150 million. LC RiverSouth is not just apartments, but truly a mixed-use development that serves a greater purpose for the neighborhood.
LC RiverSouth provides a mix of community-inspired food and beverage offerings like The Goat, a lively restaurant and social space dedicated to bringing our residents and the neighborhood together. It also includes CODE, a community-focused, inclusive wellness program. LC RiverSouth is an indicative example of the investments being made in the urban and near-urban core and represents a shift from the strong focus on suburban expansion.
What does LC take into account when creating the experiential, wellness-based living environments?
Zelina: We approach the communities we build as catalysts for connection, not just short-term development opportunities. Instead of empty clubhouses, typical apartment gyms and grandiose leasing offices, we have a portfolio of branded offerings that encourage participation. The Goat serves as our social hub and gathering place. CODE, our newest brand that launched this year, combines a traditional gym including dedicated group fitness space with a unique and holistic approach to wellness, and is led by a Community Wellness team.
Coworking spaces are now shared among our Community Wellness team and serve as a space for residents and neighbors to engage, connect and create. We don’t do one deal and then leave the market. We join neighborhoods with the aim of being a long-term partner and community member. Our goal is to build a few thousand units in multiple communities and establish strong ties that are mutually beneficial, building our brand along the way.
Some fear that the recent economic growth in Columbus is not completely sustainable, given the tight job market and slow pace of construction. What are your expectations from Columbus’ multifamily market going forward?
Zelina: Columbus, much like all other markets LC has a presence in, benefits from a diverse economy that’s balanced with a combination of education, technology, government, research, insurance and health-care entities. We think this will result in the long-term growth of Columbus that outpaces its Midwest neighbors.
Columbus is attracting talent from outside the market, which hasn’t historically been the case, and the graduates from surrounding universities are opting to stay here. Columbus also boasts a myriad of cross-sector partnerships, public and private, city and schools, federal government and local communities, that provide a benefit to every facet of life in a neighborhood.
When we look at Columbus, we don’t focus on short-term uptrends and downtrends, but we focus on the long-term outlook of the city. That’s how we invest. We invest in all of our markets by being long-term partners and owners of real estate.